It seems to be the season for acquisitions, following their $1.8b investment in Cronos (CRON), news has now come through Altria (MO) is likely to acquire a 35% stake in Juul (JUUL) for approximately $13.3b. Although the strength of Altria’s financial position is generally acknowledged within the investment community, since this latest acquisition is quite large, it’s important to assess the impact and the implications moving forward.

The Impact On Their Financial Position

Regardless the size of the company and strength of their existing financial position, investing a combined $15.1b in a short period of time will have a significant impact. At the end of the third quarter their net debt stood at $11.51b and with an annualized EBITDA of $11.07b their net debt to EBITDA ratio was a very manageable 1.04. Following these acquisitions their net debt will increase to approximately $26.61b and even if their EBITDA remained the same, their net debt to EBITDA ratio would sit at 2.40. This would still be quite a manageable amount of net debt given the majority of this EBITDA is produced by their stable and economically resilient cigarette business. To provide a comparison, as per my previous article, British American Tobacco’s (BTI) net debt to EBITDA currently sits at a much higher 4.47.

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