Sleeping with the enemy: Juul closes $12.8 billion deal with Altria

The world’s largest manufacturer of vaping products Juul Labs finalized the largest investment deal in U.S. history last Thursday with Big Tobacco’s The Altria Group of Marlboro fame.  The 12.8 billion-dollar investment now makes Altria a 35 percent shareholder in the e-cig company overall.   News of the financial partnership seemingly flies in direct contradiction to Juul’s 2015 promise to eventually render combustible tobacco products obsolete.

When news broke in early December of a possible collaboration, comments of surprise, confusion, and even disgust began surfacing from employees inside the vapor company.    In a slack group comprised of Juul staffers, many employees discounted the rumor as fake news.

Related Article: Juul employees angered over Altria ‘deal with the devil’

Others were befuddled as to why any organization devoted to the eradication of smoking could possibly allow a Big Tobacco giant to contribute to company coffers.  And according to  Gizmodo, at least one peeved employee called the proposition a “deal with the devil.”

Money sometimes heals all wounds

This internal angst at Juul Labs seems very short-lived, however.  In just a few short weeks, the deal would be done, and several Juul workers would become instant millionaires.  Of the $12.8 billion, $2 billion is specifically being set aside to provide end-of-the-year Christmas bonuses to each of Juul’s 1500 employees. 

If the money were to be divided equally, then that means each staffer would get about $1.3 million.  Unfortunately, the Wall Street Journal (WSJ) is reporting that this will not be the case.  Instead, bonuses will be awarded based on several criteria.

For example, Juul employees will receive $150 for each share of company stock owned.  Those with longer work histories at the company tend to have more shares of stock, and therefore, should receive larger bonus checks as a result.

Related Article: Still eyeing Juul, Altria invests $1.8 billion in Canada cannabis company Cronos

In November 2017, Juul had little more than 300 employees on the company payroll, but its surge in sales over the past year has led to the increased staff of about 1500.  Those first 300 staffers should get a hefty chunk of year-end cash while the remaining 1200 employees will likely get proportionally less.

Juul comes out smelling like a rose after FDA bashing of vaping

A significant majority of the vaping community-at-large is not looking upon this Altria deal favorably.  For well over a year now, the U.S. Food and Drug Administration (FDA) under the direction of Commissioner Scott Gottlieb has been targeting the vaping industry as a whole for complete annihilation.   Amid allegations of a nationwide teen vaping “epidemic,” Gottlieb and his cronies have been consistently blaming vapor companies for what the FDA calls “kid-appealing” marketing strategies. 

Related Article:  Marlboro maker Altria caves to FDA; stops selling flavored vape

Since Juul products account for more than 70 percent of U.S. sales, the FDA’s Gottlieb blames Juul most especially for this surge in teenage e-cig use, even though national smoking rates are at their lowest point in recorded history. In early November 2018, both Juul and Altria were forced to pull all flavored vapes from conventional brick-and-mortar retailers in an effort to prevent an often verbalized threat by Gottlieb to abolish their sales completely - even online.

Within days, Juul Labs even curtailed its social media marketing campaigns, too.  Many vapers now wonder:  Is it fair for Juul to accept billions of dollars from Big Tobacco when Juul is the primary reason that the FDA hates vaping with such passion and aggression?

Altria deal could signal potential death knell for Juul

The deal with Altria not only gives Juul and its employees a massive financial boost, but the vape manufacturer gains another substantial legal benefit, as well.  Altria and Big Tobacco have spent decades fighting Congress, the FDA, and other anti-tobacco activists to prevent government overregulation.  This abundance of legal expertise could come in handy if Juul needs to battle against possible future anti-vaping regulations heading down the pike.  

Related Article: Big Tobacco stocks soar amid FDA accusations targeting vaping, juuling

Meanwhile, Altria gains a toehold in the vaping industry as global sales of tobacco products have plummeted dramatically by approximately 90 percent in the past thirty years.  Altria is also flirting with Canadian cannabis which was recently legalized at the federal level with growing political support among U.S. lawmakers also gaining traction.

Either way, Altria comes out smelling like a rose.  And so does Juul...for the moment.

What Juul executives may have failed to consider is that the vast legal expertise compiled over the years by Altria has the potential to cut both ways.  It could aid in helping Juul to win in numerous courts of law, or Altria could secretly wield its awesome power adversely from behind the scenes to perhaps thwart Juul’s legal efforts and even expedite its ultimate demise.  At this point, anything is possible. 

Related Article: Still eyeing Juul, Altria invests $1.8 billion in Canada cannabis company Cronos

(Image courtesy of Shutterstock)

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