Juul in Deal Talks With Three Tobacco Giants

Juul Labs Inc. is looking for a new partner.

The e-cigarette maker, which came close to filing for bankruptcy protection last fall, is now in early-stage talks with three tobacco giants, according to people familiar with the matter. Juul is seeking a potential sale, strategic investment, licensing or distribution deal, the people said.

Juul executives in recent weeks have had separate discussions with Philip Morris International Inc.,

PM 2.05%

Japan Tobacco 2914 0.32%

Group and Altria MO 0.32%

Group Inc., the people said. A deal isn’t imminent, the people said, and the discussions might not result in a sale or partnership. Altria, which owns a 35% stake in Juul, valued the vaping company at $1 billion in October.

Juul, which represents 27% of e-cigarettes sold in US stores tracked by Nielsen, reached the brink of bankruptcy last year amid a dispute with federal regulators over whether its products could remain on the US market. The still-unresolved dispute made it difficult for Juul to raise money to cover its legal liabilities.

Juul in December agreed to pay $1.7 billion in a broad legal settlement covering more than 5,000 lawsuits. Many of the lawsuits accused the e-cigarette maker of marketing its products to children and teens. Juul has said it never targeted young people and has been working to regain the trust of regulators and the public.

To pay for the settlement, Juul secured an equity investment from a group including two Juul directors, The Wall Street Journal has reported. The settlement and financing put Juul on firmer ground and allowed the company to begin talks with potential strategic partners.

Juul reached late-stage talks with Altria last fall on a potential deal to sell Juul’s international business or license its US intellectual property but those talks fell apart in September as Juul prepared for a potential bankruptcy filing, people familiar with the discussions said. Those talks haven’t been previously reported.

Altria on Sept. 30 announced it was ending its noncompete agreement with Juul. The decision gave the Marlboro maker the flexibility to acquire another e-cigarette brand or develop its own new vaping products. And it gave Juul the freedom to sell itself—or a significant stake—to one of Altria’s competitors.

Juul Chief Executive KC Crosthwaite and other Juul executives traveled this month to Switzerland, where both Japan Tobacco and Philip Morris are based, to discuss Juul’s newly expanded options, some of the people familiar with the matter said.

Juul has also resumed discussions with Altria, these people said. Altria can’t buy Juul outright because of antitrust concerns: In a case that is pending, the Federal Trade Commission is seeking to unwind Altria’s 2018 investment in Juul. Altria and Japan Tobacco in October formed a partnership to develop and sell heated tobacco devices in the US and other new tobacco products abroad.

Altria sells Marlboro cigarettes in the US, while its erstwhile partner Philip Morris sells Marlboros outside the US The companies split in 2008. Philip Morris now plans to re-enter the US market through its acquisition of Swedish Match.

The Food and Drug Administration in June ordered Juul to take its products off the US market, then kept the order pending Juul’s appeal. If the FDA ultimately rejects Juul’s e-cigarettes, Juul could seek US authorization for a newer version of its vaporizer that so far has been released in Canada and the UK Juul also has other products under development.

Write to Jennifer Maloney at Jennifer.Maloney@wsj.com and Laura Cooper at laura.cooper@wsj.com

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