Philip Morris International Inc. (PM) and Altria Group Inc.’s (MO) merger talks went up in smoke on Wednesday, Sept. 25, at the same time as Juul Lab Inc. CEO Kevin Burns stepped down.
The talks fizzled because the two parties “could not reach agreement,” Altria CEO Howard Willard said in a statement. However, it’s almost certain that mounting troubles for vaping giant Juul — of which Richmond, Va.-based Altria owns a 35% stake — played a role in the potential deal’s dissolution.
At Juul, Burns will be replaced with K.C. Crosthwaite, an Altria SVP. Crosthwaite, who has worked at Altria for more than two years, is the former president and CEO of Philip Morris’ U.S. operations, according to relationship mapping service BoardEx, a sister company of The Deal.
Though Altria’s announcement that Burns would step down certainly represents a turning point, San Francisco-based Juul has been warding off a deluge of regulatory concerns and iffy press for weeks.
For instance, on Sept. 11, President Donald Trump announced his administration’s plan to ban flavored nicotine products. Just days before, on Wednesday, Sept. 4, Michigan became the first state to ban flavored e-cigarettes entirely, citing them as a public health emergency. Then, on Sept. 24, the House Committee on Oversight and Reform held a hearing about the connection between vaping and lung illness, as well as in recognition of the Center for Disease Control’s advisory against the use of e-cigarettes.
Finally, in its own Sept. 25 statement, Juul announced that it would cease its advertising operations in the United States and accept the Trump administration’s ban on flavored vaping products.
Meanwhile, the prospective Philip Morris-Altria merger — which would have created a company with a roughly $200 billion market cap — wasn’t a sure bet either. The Deal reported on Sept. 12 that the regulatory review was sure to be a lengthy process shepherded by the Federal Trade Commission, with an eye on the future of vaping since Philip Morris markets its own vaping product, iQOS.
Altria declined comment beyond its release. Philip Morris did not respond to a request seeking comment.