Altria nears deal to buy $12.8-billion stake in Juul, sources say

Juul Labs Inc., the San Francisco company behind the wildly popular e-cigarette, is nearing a deal to sell about a third of itself to tobacco giant Altria Group Inc., people familiar with the negotiations said.

The investment would make Juul the second-most-valuable privately held company after Uber Technologies Inc. and put its products next to Marlboro cigarettes on the top shelf in the United States, said the people, who asked not to be identified because the information was private.

Altria, which is focused on the U.S. market after spinning off Philip Morris International Inc. in 2008, is set to invest about $12.8 billion in Juul, valuing the e-cigarette maker at roughly $38 billion, the people said. The deal is expected to close before the end of this week, they said.

An agreement hasn’t been reached and talks could still end without one, the people said.

Representatives for Altria and Juul declined to comment.

At a valuation of $38 billion, the deal would be the second-biggest such investment this year and among the 10 largest of all time, according to data compiled by Bloomberg. The Wall Street Journal reported earlier that the companies were nearing an agreement.

The controversial tie-up would more than double Juul’s value, which just a few months ago was $16 billion after Tiger Global Management led a $1.2 billion-investment in the e-cigarette maker.

Since launching in 2015, Juul has been a runaway success, attracting the ire of parents and regulators who say the company’s devices hook teenagers. Food and Drug Administration Commissioner Scott Gottlieb has called youth use of e-cigarettes an epidemic. Last month, Juul said it stopped selling its fruit-flavored nicotine pods to stores and shut down its U.S.-based Facebook and Instagram accounts.

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Juul has branded itself as a technology company on a mission to get addicted smokers off tar-burning cigarettes.

As part of the agreement, Marlboro would put coupons for Juul’s products inside and outside its cigarette cartons, one of the people said. Altria would also give Juul’s vaporizer pen and pods valuable shelf space in retail stores, the person said. Altria, which only sells its cigarettes in the United States, would benefit from international exposure as Juul expands to new markets outside the country.

A spokesman for Philip Morris International didn’t immediately return a message seeking comment about how the deal would affect IQOS, a “smoke, not burn” device that Altria plans to sell in the United States if it gets approved by regulators. Philip Morris is already selling it in some countries.

Juul’s employees will be able to sell their shares as part of the agreement, the people said.

Zaleski writes for Bloomberg.