U.S. cigarette maker Altria Group Inc said industry peer Philip Morris International Inc (PMI) has agreed to pay it $2.7 billion (€2.76 billion) for the exclusive right to sell IQOS heated tobacco products in the United States.
Altria in a statement said it has already received $1.0 billion (€1.02 billion) from PMI and will receive the remainder by July 2023.
The company had been selling IQOS in the United States through unit PM USA in partnership with the smoke-free product's developer PMI under an agreement that was set to expire in 2024.
New Five-Year Term
"Upon achieving additional milestones, PM USA had the option to renew for an additional five-year term through April 2029. We believe that PM USA met each of these milestones, but PMI disagreed with our position," Altria said.
IQOS devices differ from traditional combustible cigarettes in that they heat tobacco-filled sticks wrapped in paper, generating an aerosol that contains nicotine. They are different from e-cigarettes such as those from Juul, which vaporize a nicotine-filled liquid.
PMI is ready to invest in IQOS and bring it to market at scale across the United States and is well advanced in its plans, chief executive Jacek Olczak said.
"The route-to-market is clear given the well-established distribution and retail channels in the U.S., and we are well prepared to proceed autonomously to develop IQOS and the rest of our smoke-free portfolio should the offer for Swedish Match fail," Olczak said in a statement to Reuters.
Swedish Match Offer
Philip Morris plans to raise its $16 billion offer for Swedish Match AB, the Wall Street Journal reported on Wednesday citing people familiar with the matter.
The new offer is likely to be announced as soon as Thursday, the newspaper said. Activist investor Elliott Management, which raised its stake in Swedish Match last month, plans to oppose the bid under its current terms along with some other investors.
PMI declined to comment on the WSJ report. Swedish Match did not respond to a Reuters request for comment outside of business hours.
PMI, which was spun off from Altria in 2008, will report its quarterly earnings results on Thursday. Altria will report its earnings on October. 27.