Altria Enters Growing Oral Nicotine Products Category with on! Pouch Product

Company Release - 6/3/2019 7:30 AM ET

RICHMOND, Va.--(BUSINESS WIRE)-- Altria Group, Inc. (Altria) (NYSE:MO) today announces that it has entered into definitive agreements with the shareholders of Burger Söhne Holding AG (the “Burger Group”), based in Switzerland, to acquire 80% ownership of certain companies of the Burger Group that will commercialize on! products worldwide. on! is an oral tobacco-derived nicotine (TDN) pouch product.

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on! Product Portfolio (Photo: Business Wire)

on! Product Portfolio (Photo: Business Wire)

“We’re excited to add on! to our companies’ terrific non-combustible portfolio,” said Howard Willard, Altria’s Chairman and Chief Executive Officer. “Through our companies and investments, we have access to the leading products and brands in the moist smokeless tobacco, e-vapor and heated tobacco categories. This acquisition will add another non-combustible product to our portfolio in what we believe is a high-potential, rapidly-developing oral TDN products category.”

Upon closing, Altria will invest $372 million for an 80% ownership interest in the global business. Altria expects to complete the transaction in the second half of 2019, subject to customary closing conditions, and to finance the transaction with available cash.

About on!

on! is a nicotine pouch in the oral TDN category. The broad on! portfolio consists of seven flavors and five nicotine strengths for a total of 35 SKUs, all of which were available for sale in the U.S. market as of August 8, 2016. on! is currently available in limited distribution in several thousand U.S. retail outlets, is available in Sweden and Japan and is also sold via e-commerce.

Additional Transaction Details

Altria formed a new subsidiary, Helix Innovations LLC (“Helix”), that upon closing, will be the parent company of the Burger Group subsidiaries currently manufacturing and selling on!.

The parties have also entered into an agreement under which Altria will distribute on! across the U.S. in advance of the transaction closing, which we expect will allow Altria to quickly expand retail distribution.

According to IRI, in 2018, sales of TDN products grew to around $60 million in the U.S., demonstrating approximately 250% growth compared to 2017. Approximately 20 million adult smokers in the U.S. are interested in tobacco products that offer reduced-harm potential and, specifically, more than six million adult tobacco consumers are open to trying oral TDN products.

“We’re excited to put our resources behind on! and participate in what we expect to be a fast-growing category. Combining our deep understanding of adult tobacco consumers and Altria’s best-in-class sales and distribution infrastructure, we expect to drive the on! brand toward sustainable, long-term leadership,” said Allison Bolyard, Senior Director and General Manager of Helix.

Altria's Profile

Altria’s wholly-owned subsidiaries include Philip Morris USA Inc. (PM USA), U.S. Smokeless Tobacco Company LLC (USSTC), John Middleton Co. (Middleton), Sherman Group Holdings, LLC and its subsidiaries (Nat Sherman), Ste. Michelle Wine Estates Ltd. (Ste. Michelle) and Philip Morris Capital Corporation (PMCC). Altria holds equity investments in Anheuser-Busch InBev SA/NV (AB InBev), JUUL Labs, Inc. (JUUL) and Cronos Group Inc. (Cronos).

The brand portfolios of Altria’s tobacco operating companies include Marlboro®, Black & Mild®, Copenhagen® and Skoal®. Ste. Michelle produces and markets premium wines sold under various labels, including Chateau Ste. Michelle®, Columbia Crest®, 14 Hands®and Stag’s Leap Wine Cellars, and it imports and markets Antinori®, Champagne Nicolas Feuillatte and Villa Maria Estateproducts in the United States. Trademarks and service marks related to Altria referenced in this release are the property of Altria or its subsidiaries or are used with permission.

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Forward-Looking and Cautionary Statements

This release contains projections of future results and other forward-looking statements that involve a number of risks and uncertainties and are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.

Important factors that may cause actual results and outcomes to differ materially from those contained in such forward-looking statements include: the parties’ ability to consummate the transaction as expected, including the possibility that one or more of the conditions to the consummation of the transaction may not be satisfied; the parties’ ability to meet expectations regarding the timing, completion and other matters related to the transaction; the risk of litigation, arbitration and/or regulatory actions related to the proposed transaction; and any event that could give rise to the termination of the agreement between the parties. Other important factors include the possibility that the expected benefits of the transaction may not materialize in the expected manner or timeframe, if at all; prevailing economic, market, or business conditions negatively affecting the joint venture; the fact that Altria’s reported earnings and financial position and any distributions made by the joint venture may be adversely affected by unfavorable foreign currency exchange rates, tax and other factors, including the risks encountered (including litigation and regulatory risks) by the joint venture in its business; risks relating to the effect of announcement or the consummation of the transaction on the joint venture’s ability to retain and hire key personnel and maintain relationships with customers, suppliers and other third parties; risks generally related to joint venture investments, including Altria’s lack of sole decision-making authority and disputes between the parties; and the other factors detailed in Altria’s publicly filed documents, including its Annual Report on Form 10-K for the year ended December 31, 2018 and its Quarterly Report on Form 10-Q for the period ended March 31, 2019.

Altria cautions that the foregoing list of important factors is not complete and does not undertake to update any forward-looking statements that it may make except as required by applicable law. All subsequent written and oral forward-looking statements attributable to Altria or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements referenced above.

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Source: Altria Group, Inc.

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