Research Update: Altria Group Inc. Downgraded To 'BBB' On Large Investment In JUUL; Outlook Stable

U.S.-based Altria Group Inc. has agreed to acquire a 35% equity stake in JUUL Labs Inc. for an estimated $12.8 billion. Altria intends to finance this investment, along with its recently announced investment in Cronos Group Inc., entirely with debt. We estimate debt to EBITDA, pro forma for the transactions, to be slightly under 3x. We do not believe JUUL or Cronos will provide significant near-term investment returns to Altria. Given Altria's track record of high shareholder returns, we do not expect the company to deleverage meaningfully from pro forma levels in the next few years. We are lowering our issuer credit rating on Altria to 'BBB' from 'A-'. The outlook is stable. We are also lowering our issue-level ratings

...+ U.S.-based Altria Group Inc. has agreed to acquire a 35% equity stake in JUUL Labs Inc. for an estimated $12.8 billion. Altria intends to finance this investment, along with its recently announced investment in Cronos Group Inc., entirely with debt. We estimate debt to EBITDA, pro forma for the transactions, to be slightly under 3x. + We do not believe JUUL or Cronos will provide significant near-term investment returns to Altria. Given Altria's track record of high shareholder returns, we do not expect the company to deleverage meaningfully from pro forma levels in the next few years. + We are lowering our issuer credit rating on Altria to '###' from 'A-'. The outlook is stable. We are also lowering our issue-level ratings on its senior unsecured debt to '###' from 'A-'. + The stable outlook reflects our expectation that debt to EBITDA will be sustained in the high-2x area as the core tobacco business continues to generate modest profit growth and Altria returns the majority of free...

Research Update