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The antitrust agency alleges tobacco giant Altria exited the e-cigarette market and agreed “not to compete in return for a substantial ownership interest in Juul”—35 per cent of the company, for which Altria paid US$12.8 billion in December 2018. The administrative trial is scheduled to begin on Jan. 5, 2021. Juul declined to comment to The Wall Street Journal. Altria general counsel said its investment “does not harm competition.” (The Logic, The Wall Street Journal)

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Talking point: The FTC hasn’t said if it wants to unwind the deal, but Altria’s stake in Juul is worth much less now than when it was acquired. In January, Altria wrote down its investment for a second time, cutting US$8.6 billion in total. Both sides have faced challenges. In November 2019, Juul announced it would lay off 650 staff and reduce expenses by US$1 billion. The two firms are also linked through their executive ranks: K.C. Crosthwaite, who became Juul’s CEO in September 2019, is Altria’s former chief growth officer, while the startup’s regulatory head, Joe Murillo, joined from the tobacco firm the following month.

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The tobacco giant now values the vaping company at roughly US$12 billion, down from the US$38-billion valuation that saw it pay US$12.8 billion in cash for a 35 per cent stake in the company in December 2018. Altria had already written down its investment by US$4.5 billion in October 2019. (The Wall Street Journal)

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Talking point: Altria CEO Howard Willard said he was “highly disappointed” in the performance of the company’s investment. Since it bought in, e-cigarette manufacturers have faced lawsuits and increased regulatory pressure amid public health concerns and worries about vaping’s attractiveness to young people. Juul has tried to get ahead of the backlash; as my colleague Murad reported earlier this month, its Canadian subsidiary has temporarily stopped producing most flavours of its vaping pods—believed to be particularly appealing to the teens—in an attempt at “earning the trust of society.” That decision came after the parent company’s removal of most flavoured pods from the U.S. market over the last two years, in the lead-up to a federal ban. Altria also announced it will stop providing Juul with marketing and retail distribution, offering assistance with regulatory wrangling instead. Its shares were down nearly five per cent in late-day trading.

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Tobacco company Altria is getting close to taking a 35 per cent stake, which would value Juul at US$35 billion, making the electronic cigarette company one of the most valuable private companies in the United States. (Wall Street Journal)

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Talking point: Juul’s valuation would make the three-year old company worth US$4 billion more than Airbnb and three times more than Pinterest. The company has about 1,500 employees and US$2 billion in annual revenue. Some of that revenue comes from Juul’s popularity with children, who report enjoying the different flavours offered by the company and the ability to surreptitiously smoke in school (although administrators are trying to crack down). Last month, the U.S. Food and Drug Administration decided not to ban the sale of flavoured e-cigarettes, which would have been a blow to Juul.

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The parent company of Marlboro cigarettes will invest $2.4 billion in Toronto-based Cronos Group, giving the Virginia-based tobacco giant a 45 per cent ownership stake in the cannabis producer. Under the agreement, Altria can invest another $1.4 billion within four year, giving it 55 per cent ownership. (Wall Street Journal)

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Talking point: The transition to cannabis—as the global legal market expands—is a natural next step for Altria, whose traditional tobacco and e-cigarette sales have been declining in step with other companies’ in the industry. In February, Alliance One International bought majority stakes in two B.C. cannabis companies: Island Garden Inc. and Goldleaf Pharm Inc. In June, Imperial Brands invested in a U.K. medical cannabis company. This latest deal is the biggest of its kind to date, but almost certainly will not be the last.

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The stock of Cronos, the Canadian marijuana producer, rose 11.15 per cent on Monday, after it was reported that the U.S. tobacco company was looking to acquire it. Cronos’ gains bucked the wider Monday trend—the Horizons Marijuana Life Sciences ETF had fallen 2.97 per cent by the time the markets closed. Leading the drop was Aphria, a Canadian pot producer, which Gabriel Grego, founder of Quintessential Capital Management, claimed on Monday had paid inflated prices for firms in Argentina, Colombia and Jamaica linked to a company insider. Aphria said the allegations were “false and defamatory.” (CBC)

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Talking point: Cigarette makers and tobacco middlemen have been diversifying into the marijuana market, as the number of people smoking conventional sticks continues to decline. So have alcohol companies like Constellation, which now owns more than a third of Canopy Growth Corp.

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Between 800 and 950 employees will be let go in what the San Francisco-based e-cigarette company called part of its “ongoing reset” unrelated to the COVID-19 pandemic. The layoffs come months after the company slashed 650 jobs as it grappled with declining market share and increased regulatory scrutiny. (Bloomberg, The Wall Street Journal)

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Talking point: Once the stuff of Silicon Valley dreams, Juul has been a particularly wretched investment for Altria Group. The tobacco giant has twice written down its US$12.8-billion investment in the company, valuing its 35 per cent stake at US$4.2 billion in January.