What Altria's Latest $2.75 Billion Purchase Means for Shareholders
U.S. tobacco company Altria Group (NYSE: MO), the rights holder to the Marlboro cigarette brand in the U.S., recently announced a deal to acquire electronic cigarette maker NJOY Holdings for $2.75 billion in cash. Investors familiar with Altria might groan; it looks like Altria's taking another swing at a multibillion-dollar acquisition after blowing billions on its infamous Juul investment.
But there isn't nearly as much risk this time. Altria is undoubtedly paying a hefty price for what it's getting, but the acquisition could make far more sense in the long run when you consider the circumstances of the deal. Here is what matters for shareholders.
It's well known that smoking cigarettes is a steadily dying habit in the United States. Just peek at Altria's annual reports and you'll find declining cigarette shipment volumes annually. While price increases pushed Altria's profits higher over the years, the company has also begun looking for long-term business opportunities outside smokeable products. Electronic cigarette company Juul was supposed to be that, but regulators steadily derailed Juul's business.
Source Fool.com
