(Bloomberg) -- Altria Group has ended a deal that barred it from competing with Juul Labs Inc., opening the door for the Marlboro maker to buy an e-cigarette company or develop its own vaping products.

As part of ending the agreement, Altria reduced its rights to designate Juul board members. The tobacco giant’s shares in Juul are now converted to single-vote common stock, significantly reducing its voting power.

“Our decision to terminate our noncompete maximizes our flexibility to compete in e-vapor as it allows us to maintain our economic investment in Juul, to compete organically and through M&A,” Steve Callahan, an Altria spokesperson, said via email.

Altria’s investment in Juul hasn’t gone well. The US Food and Drug Administration ordered Juul products to be removed from the US market in July, though they’ve remained on sale while under administrative review. In an email, a Juul spokesperson said Altria’s move Friday “increases the financial and strategic options we can pursue to secure our business and address the impact of the FDA’s now-stayed order.”

As of June 30, Altria’s investment in Juul was worth $450 million, down from the initial carrying value of $12.8 billion when the investment was announced in 2018.

“It makes sense that Altria would need to create some optionality in the vapor category given their limited exposure to RRPs,” Cowen Inc. analyst Vivien Azer said in a Friday research note, referring to what tobacco companies call “reduced-risk products.”

Street Wrap: Analysts view Altria’s noncompete exit positively

Azer said it’s more likely Altria will look to acquire an e-cigarette maker rather than try to develop its own products, given the long regulatory road to getting such devices approved. Competitors that Altria might eye include NJOY, Azer said. The independent company that makes that e-cigarette brand already has the US Food and Drug Administration’s permission to market in the US.

The decision weakens Altria’s influence over Juul’s board but still leaves it with the right to appoint one independent director as long as it continues to own more than 10% of Juul, Azer noted.

Stopped R&D

When Altria invested in Juul in 2018, it agreed to drop its own products and stop research and development in vaping. The approach differed from that of competitors such as British American Tobacco Plc and Philip Morris International Inc., which have continued to expand product offerings in the category. Vaping is increasingly important for tobacco companies as cigarette sales decline in many countries.

The 2018 pact left Altria with its risks highly concentrated in both Juul and IQOS, a smoke-free tobacco product it markets in the US for Philip Morris International. Neither has gone particularly well: In addition to the stayed FDA order removing Juul from the market, IQOS imports to the US were barred after a patent dispute with BAT’s Reynolds American unit.

Altria provided a downbeat update on its Juul investment alongside its second-quarter earnings announcement in July. The company had a pretax unrealized loss of $1.2 billion during the quarter, primarily driven by the likelihood of an unfavorable outcome of the FDA’s Juul review. Altria also cited the possibility of Juul filing for bankruptcy.

Altria shares were down 0.5% at 10:12 a.m. in New York. The stock was down 13% this year through Thursday, compared with 24% for the S&P 500 Index.

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