Altria Group is in talks that could boost its e-cigarette holdings.
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The company is reportedly in talks to take a significant minority stake in e-cigarette startup Juul Labs, according to Dow Jones Newswires.
No deal is imminent, the people said, but should there be one, it would be big: Closely held Juul, a three-year-old company based in San Francisco with just a few hundred employees, was valued at $16 billion in a funding round this summer.
Juul had $1.8 billion in retail sales in the year ended Nov. 17, according to Nielsen data. That makes it one of the most valuable U.S. startups, but it has drawn criticism because of its products’ popularity with teens.
A tie-up would represent a major reordering of the cigarette industry, which is being roiled by technological innovation and new government regulations.
Any deal is likely several weeks away, one of the people said, and there might not be one at all. Juul is the dominant e-cigarette player with vaporizers resembling USB sticks and refill pods containing nicotine-laced liquid.
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The market for e-cigarettes is controversial due to the availability of sweet flavors, including mango and cucumber, that are popular with middle-school and high-school students.
The company says it is targeting adult smokers, which threatens Altria’s lucrative but shrinking cigarette business.
Nearly 38 million, or 15.5%, of American adults smoked traditional cigarettes in 2016, down from 20.9% in 2005, according to the Centers for Disease Control and Prevention.
Altria’s stock had declined nearly 20% over the past year as the company grappled with declines in traditional smokers and a potential U.S. ban on menthol cigarettes. It still has a market value of more than $100 billion.
Altria also sells e-cigarettes, but Juul has leapfrogged it and traditional rivals like British American Tobacco, which makes Camel and Newport cigarettes, in the roughly $2.8 billion U.S. e-cigarette retail market.
