Altria, PMI End Merger Talks

Tobacco makers unable to reach agreement; Altria executive takes helm at Juul
Photograph: Shutterstock

RICHMOND, Va., and NEW YORK Altria Group Inc. announced it has terminated previously announced talks with Philip Morris International (PMI) on a potential merger, although officials say the company's plans to market New York-based PMI’s heat-not-burn device, IQOS, in the United States will stay on track.

The two tobacco companies were originally one, but they separated in 2008 for strategic purposes.

“While we believed the creation of a new merged company had the potential to create incremental revenue and cost synergies, we could not reach agreement,” said Howard Willard, chairman and CEO of Altria. “We look forward to continuing our commercialization of IQOS in the U.S. under our existing arrangement [with PMI].”

Altria announced plans for an initial introduction of IQOS in Atlanta this fall.

In a separate decision, Altria announcement that the CEO of San Francisco-based Juul Labs, Kevin Burns, will be replaced by Altria’s senior vice president of strategy and growth, K.C. Crosthwaite. Altria purchased a 35% minority stake in Juul late last year. The decision comes amid public scrutiny that includes tweets from President Donald Trump; U.S. Food and Drug Administration (FDA) and Centers for Disease Control and Prevention (CDC) concerns over recent deaths and illnesses tied to vaping; and at least three states deciding to halt the sale of certain vaping devices.

“This decision by Juul recognizes that this is a critical time for the company,” Willard said in the same statement. “I believe K.C.’s experience, discipline and dedication to making harm reduction an industrywide reality will help Juul achieve its mission, while also urgently confronting and reversing underage use of vapor products.”

Earlier in the month, U.S. Health and Human Services Secretary Alex Azar, along with officials from the CDC and FDA, announced concerns and a coordinated investigation surrounding deaths and illnesses possibly tied to the use of vaping devices.

In the same time frame, governors from Michigan and New York used executive orders to pull flavored vaping devices from shelves. Within days, California’s governor attempted a similar move but failed to garner the necessary legislative support. Then on Sept. 24, Massachusetts Gov. Charlie Baker declared a public health emergency in response to the illnesses possibly tied to the use of e-cigarettes, calling for a temporary, four-month statewide ban on the sale of flavored and nonflavored vaping products in both retail stores and online.

Meanwhile, Bentonville, Ark.-based Walmart announced it would discontinue the sale of e-cigarettes at its stores.

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