Altria Is Said to Be Seeking a Stake in Juul

The Altria Group, whose fortune was built on traditional cigarette brands like Marlboro, is in talks to buy a minority stake in Juul Labs, the startup that has captured much of the market for e-cigarettes, two people briefed on the matter said on Wednesday.

If a deal is struck, Altria will get a piece of a popular e-cigarette maker — but one that critics say has targeted teenage customers.

Terms of the potential investment, including the size and price, were unknown, although Altria would probably have to pay a substantial amount. Juul, a 3-year-old company that is privately held, was valued by investors this summer at about $16 billion. Altria’s value at Wednesday’s market close was about $103 billion, having fallen about 13 percent over the past 12 months.

An agreement could be struck by the end of the year, one of the people briefed on the matter said, cautioning that talks could still fall apart. Spokesmen for Altria and Juul declined to comment on the negotiations, which were reported earlier by The Wall Street Journal.

The talks highlight how much e-cigarettes and vaping promise to overhaul the business of nicotine products. Sales of traditional cigarettes, while still lucrative, have continued to decline, but sales of e-cigarettes have climbed.

News of the discussions drew criticism from tobacco prevention advocates.

“The combination of Altria’s sordid history of spending billions to entice kids to smoke, and Juul’s breathtaking success at hooking a new generation of children on nicotine, could mark an historic setback for lifesaving tobacco control efforts,” Nancy Brown, the chief executive of the American Heart Association, said in a statement.

Juul’s sleek electronic devices and flavors like mango and “creme” helped the startup corner some 70 percent of the e-cigarette market. The e-cigarettes work by heating a liquid flavor pod that contains nicotine and benzoic acid; when users inhale, they ingest a quick and powerful burst of nicotine.

While Juul’s sales have grown, so have accusations from the Food and Drug Administration, educators and parents that the company deliberately markets to minors.

The FDA is investigating the sales and marketing techniques used in the industry, and in September it gave Juul and other e-cigarette sellers 60 days to come up with a plan to keep their devices away from children. Juul’s response, which the company announced two weeks ago, called for suspending sales of most of its flavored e-cigarette pods in stores and stopping its social media promotions.

Altria, too, was under pressure from the FDA. Last month, the company said it would discontinue most of its flavored e-cigarettes and stop selling some brands.

Despite its difficulties, Juul continued to expand its product line and its international reach. It is working on a way to lower the nicotine in its pods while maintaining a strong kick from the addictive chemical, which appeals to users. By reducing the nicotine level, even while amplifying the chemical’s effect, Juul would presumably be able to meet the lower nicotine limits in many countries.

And Altria — spun out of the Philip Morris tobacco giant in 2003 — appears to believe that Juul remains a promising bet on vaping. The startup has quickly leapfrogged over Altria and others in the e-cigarette market.

One of the most pressing questions that Altria has confronted of late was whether the FDA would approve IQOS, a “heat not burn” product from Philip Morris International that is intended to compete with e-cigarettes as an alternative for smokers who want to quit traditional cigarettes. Although Philip Morris makes the electronic penlike device, Altria would be the U.S. distributor.

The FDA initially seemed enthusiastic about heat not burn, one of a number of new products the agency hoped would provide lower-risk alternatives for smokers, as part of its overhaul of tobacco regulation. But an advisory committee in January recommended against approving IQOS as a reduced-risk product and suggested that Philip Morris had not proved it was safe.

The long delay gave Juul even more time to capture the e-cigarette market, hurting both Philip Morris and Altria.

Industry insiders said an Altria investment in Juul made sense for both sides. An investment would give Juul additional cash to help its defense against regulatory scrutiny. And it would provide Altria a toehold on an e-cigarette maker whose name has become shorthand among younger customers for vaping.

“Altria was probably as surprised as most of the knowledgeable insiders were about Juul’s rapid rise and capture of the marketplace,” said Marc J. Scheineson, a partner at the law firm Alston & Bird who represents smaller tobacco companies. “I think they are trying to learn from Juul’s experience and take a ride on a faster train.”

Altria is not the only company to show interest in Juul. In its latest fundraising round, the company received $1.25 billion in investments from hedge funds and mutual funds, like Fidelity Investments; Tao Capital, the investment arm of Nicholas Pritzker; and Tiger Global, a hedge fund.