Henrico County-based Altria Group Inc.  said Monday it will acquire a majority ownership stake in a Switzerland-based maker of oral nicotine products.

Altria, the parent company of top U.S. cigarette maker Philip Morris USA, said it agreed to pay $372 million for the 80 percent stake in certain companies of Burger Söhne Holding AG.

The company makes a smokeless pouch product sold under the On! brand name. The deal will enable Altria to distribute the product worldwide.

The investment continues a diversification strategy for Altria, a major employer in the Richmond region, as the company seeks to offset declining cigarette sales by offering non-combustible products and electronic cigarettes as an alternative.

"This acquisition will add another non-combustible product to our portfolio in what we believe is a high-potential, rapidly-developing oral TDN (tobacco-derived nicotine) products category,” said Howard Willard, Altria’s chairman and chief executive officer.

Altria also owns the top U.S. maker of smokeless tobacco products, U.S. Smokeless Tobacco Co. LLC, which makes moist snuff brands such as Skoal and Copenhagen.

The deal with Burger Söhne, expected to close this year, is the third significant investment by Altria in new product lines in six months.

In December, the company announced it would spend $1.8 billion for a 45 percent ownership stake in Cronos Group Inc., a Canadian company that produces and sells dried cannabis and cannabis oils.

Also in December, Altria announced a $12.8 billion investment for an ownership stake in the fast-growing electronic cigarette company Juul Labs Inc.

The On! product is a pouch that contains nicotine but no tobacco leaf, a spokesman for Altria said. That puts the product in an emerging category of products designed to be used orally, giving the user nicotine without direct exposure to tobacco leaf.

Swedish Match, a Sweden-based tobacco company with its North American headquarters in Richmond, started a nationwide roll-out in March of another product called Zyn, which is also an oral pouch that contains nicotine salts but no tobacco leaf. Swedish Match first introduced the brand at a limited number of retail stores in Colorado in 2016.

In a note to investors on Monday, tobacco industry analyst Bonnie Herzog of Wells Fargo Securities said Altria's investment gives the company "an immediate answer to Swedish Match’s Zyn with a broader selection of nicotine strengths...and seven flavors."

Altria said it formed a new subsidiary, Helix Innovations LLC, which upon closing of the deal will be the parent company of the Burger Group subsidiaries currently manufacturing and selling the On! product.

The product, which is sold in seven flavors and five nicotine strengths, is currently available in limited distribution in several thousand U.S. retail outlets, Altria said. It is sold in Sweden and Japan and online.

Altria said it plans to finance the deal with available cash.

Get breaking news emails

* I understand and agree that registration on or use of this site constitutes agreement to its user agreement and privacy policy.

Recommended for you

Load comments