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Antitrust Probe of Altria-Juul Deal Reportedly Is Continuing

Altria Group is still being investigated for antitrust violations regarding its acquisition of Juul, The Wall Street Journal reports. Separately, an analyst at CFRA downgrades the stock to sell from hold.

Altria Group (MO) - Get Altria Group Inc Report is continuing to be investigated for antitrust violations regarding its acquisition of Juul, The Wall Street Journal reported Friday.

Shares of Altria were essentially flat at $51.13.

The Federal Trade Commission is continuing its probe into the company's investment in e-cigarette startup Juul Labs, the Journal said. Altria first confirmed the investigation in October.

In December 2018, Altria acquired a 35% stake in Juul for $12.8 billion and agreed to place Juul coupons on cigarette packs, send Juul promotions to cigarette smokers on a mailing list and provide Juul with shelf space as part of the tie-up.

The FTC is reviewing the company's acquisition of additional retail shelf space for its e-cigarette products, which it did even as it was winding down its e-cigarette business and acquiring a stake in Juul, one source said. 

The FTC also is looking at whether the company played a role in the resignation of Juul CEO Kevin Burns and in naming Altria executive K.C. Crosthwaite as his successor.

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The agency could require changes to the deal in order to appease any antitrust
concerns or attempt to block it outright, the Journal said.

Separately, CFRA analyst Garrett Nelson downgraded Altria to sell from hold on Friday and lowered his 12-month price target to $44 from $50 over concerns about a hike in the minimum age to buy tobacco.

In a note to investors, Nelson wrote that he thought “recent federal legislation raising the
minimum purchase age to 21 for tobacco products presents a significant long-term headwind” for the company.

Nelson cited data from the Centers for Disease Control that said "12.5% of middle school and 31.2% of U.S. high school students reported they were currently use of some form of tobacco product in 2019 (mostly e-cigarettes)."

In addition, Nelson said that Altria may be forced to make more "draconian" cost cuts to support profit and the company may also need to write down part of the value of its 35% stake in Juul, which is the subject of regulatory and criminal investigations over allegations it targeted teenagers in advertising.