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Report: Altria closes in on $12.8B cash deal for 35% stake in Juul

U.S. tobacco giant Altria Group Inc. is close to finalizing a $12.8 billion cash deal to acquire a 35% stake in Juul Labs Inc., The Wall Street Journal reported Dec. 19, citing people familiar with the matter.

The deal could be announced as soon as this week and would value the San Francisco-based e-cigarette maker Juul at $38 billion, the Journal reported.

The new report comes just weeks after the Journal reported Nov. 28 that the companies were in initial talks about a potential minority investment.

An Altria spokesperson declined comment Dec. 19 to S&P Global Market Intelligence. Juul did not immediately respond to a message seeking comment.

Altria shares rose about 1.5% in afternoon trading Dec. 19 to $51.64 per share.

Some employees at the privately owned Juul were upset by talks with Altria, claiming a deal would run counter to Juul's mission to help smokers turn away from cigarettes, the Journal reported. Since then, Juul CEO Kevin Burns told employees that any deal would stipulate that Juul maintain control of the company, give employees an option to cash out shares and require new investors to support Juul's mission, according to the Journal.

Altria, which makes Marlboro cigarettes, recently dropped its e-cigarette business because of financial performance and regulatory pressure on e-cigarettes related to the surging use by minors. The company announced the move Dec. 7 and stopped accepting online orders for its e-cigarette brands Dec. 19.

Juul's e-cigarettes have surged in popularity, with nearly $2 billion in retail sales during the last year that easily outpaced sales of Altria's now-defunct brands and those of other tobacco producers. Juul's devices and other e-cigarettes generally heat liquid containing nicotine and produce flavored vapor.

Meanwhile, the U.S. Food and Drug Administration wants to limit the sales of fruit, candy and crème flavored e-cigarettes to stores that do not allow minors and require enhanced age-verification for online purchases. The moves would discourage e-cigarette use by minors, according to the FDA.

Analysts have said a partnership between the companies could give Altria access to a fast-growing product that threatens its core cigarette business. Juul, meanwhile, could benefit from Altria's experience and positive relationship with the FDA, according to analysts.

Altria is also investing in cannabis through a $1.8 billion deal for a 45% stake in Canadian cannabis producer Cronos Group Inc. That deal should close sometime in 2019.