PMI will have full US commercialization rights to sell IQOS products in the US market after April 30, 2024. Photo credit: Reb Center, Creative Commons
Philip Morris International (PMI) and Altria Group Inc. are ending their IQOS commercialization agreement on April 30, 2024, after which PMI will have the exclusive right to sell IQOS products in the US market.
PMI will pay a total of US$2.7 billion cash consideration as part of the deal, US$1 billion of which was paid with available funds at the inception of the agreement. The remaining balance will be paid by July 2023 at the latest, with interest.
Jacek Olczak, PMI’s c.e.o, said, “This agreement gives PMI full US commercialization rights to IQOS within approximately 18 months and provides a clear path to fulfilling the product’s full potential in the world’s largest smoke-free market, leveraging PMI’s full strategic and financial commitment to IQOS’ success. The agreement also avoids what could have been an uncertain and protracted legal process that would have severely hindered the fast deployment of IQOS in the US.”
There was a dispute about IQOS between the two companies because Altria said one of its subsidiaries had an option to extend the IQOS contract until April 2029 after it had reached certain milestones. PMI officials, however, believe that Altria did not meet agreed sales targets for IQOS that would allow Altria to extend its exclusive US rights. An Altria statement said, "The parties were unable to reach a long-term agreement and decided to enter into the agreement to transition and ultimately conclude their relationship.”
Olczak added, “We are ready to invest behind IQOS to bring it to market at scale across the U.S., leveraging the proven capabilities of our outstanding commercial engine, which we will deploy domestically during the transition period to April 30, 2024. The route-to-market is clear given the well-established distribution and retail channels in the US, 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.”
Separately, PMI received the greenlight from the European Commission for its proposed acquisition of Swedish Match after raising its buyout offer and agreeing to sell off Swedish Match’s logistics arm, SMD Logistics.