Altria takes $4.5 billion charge as Juul investment sours amid vaping backlash

By Manas Mishra

(Reuters) – Altria Inc (N:) took a $4.5 billion hit from its investment in electronic-cigarette maker Juul Labs Inc on Thursday as it faced up to the financial fallout of a regulatory crackdown on the vaping industry this year.

The U.S. tobacco company bought a 35% stake in the fast-growing e-cigarette rival for $12.8 billion last year, hoping to make up for falling sales of traditional cigarettes.

But Juul faces the possibility of its products being removed from the market over concerns that they are fueling the so-called epidemic of youth vaping, a major factor that led to the collapse of Altria’s merger talks with Philip Morris (N:) last month.

Altria on Thursday cited a number of reasons for the charge, including higher chances of U.S. Food & Drug Administration removing flavored e-vapor products from the market as well as bans in some cities and states in the United States.

Juul has suspended advertising in the United States, hired an Altria-executive as its CEO and revamped its management in the past few weeks.

Altria also said it expects the Federal Trade Commission’s request for additional information into its Juul investment to be resolved in first-quarter of 2020.

While vaping devices, which vaporize a liquid containing nicotine, have borne the brunt of the regulatory crackdown globally, the FDA has authorized tobacco heating product iQOS, a rival non-smoking technology.

Altria holds the rights to sell iQOS in the United States.

The company reported a net loss of $2.60 billion, or 1.39 per share in the third quarter ended Sept 30, from a profit of $1.94 billion, or $1.03 per share.

Shares of the U.S. maker of Marlboro rose 1.6% to $46.70 before the bell.

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