Juul is worth at least one more puff

JAPAN TOBACCO

25/01/2023 22:36

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are their own.)
       NEW YORK, Jan 25 (Reuters Breakingviews) - Cigarette
makers can’t shake their vaping addiction. Philip Morris
International  PM.N , Japan Tobacco  2914.T  and Altria  MO.N 
may want to buy Juul, the Wall Street Journal reported on
Wednesday. There’s a big regulatory cloud hanging over the
smokeless trailblazer, but there are reasons to spark up a deal.
    Juul stands accused by the U.S. Food and Drug Administration
of marketing its product to underage users, prompting the agency
to seek removal of its products from shelves. Juul has appealed
the decision, but it’s struggling in the meantime. Dollar sales
have fallen by about 25% over the past year, according to Cowen
analysts. Its 75% market share in 2018 is now down below 30%.
    Altria, which ended a noncompete agreement with Juul last
year, has marked down its 35% stake to $350 million, a 97% drop
from what it paid four years ago. Juul would need to hawk some
$250 million of e-cigs annually to justify today’s imputed $1
billion valuation, based on the multiple of sales the Altria
enterprise fetches. That top line would represent just 5% of the
e-cigarette market, according to 2020 Federal Trade Commission
data, giving it plenty to burn. At a big discount, it makes the
business worth one more puff. (By Lauren Silva Laughlin)
    Follow @Breakingviews on Twitter
    Capital Calls - More concise insights on global finance:
    Thrive Capital kicks off bestie race  urn:newsml:reuters.com:*:nL4N3492MG 
    “Angry Birds” buyout may have more levels to beat
 urn:newsml:reuters.com:*:nL4N3452F8 
    Cellnex takeover would disrupt key strategic pivot
 urn:newsml:reuters.com:*:nL4N345289
    Brutal stomping leaves Dr. Martens better priced
 urn:newsml:reuters.com:*:nL4N3443E1
 (Editing by Jeffrey Goldfarb and Sharon Lam)
 ((SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS https://bit.ly/BVsubscribe
 |))