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Philip Morris and Altria in merger talks as Marlboro fades and e-cigs light up

August 29/2019

MOSCOW (MRC) -- Marlboro maker Philip Morris International Inc said it was in talks to reunite in a merger with Altria Group Inc (MO.N) following its 2008 spin-off, as the tobacco giants seek to pool resources in the fast growing e-cigarette market, said Reuters.

The merger between the two companies, the biggest ever in the consumer sector and the fourth-largest deal of all time, would create a tobacco giant with a market capitalization of approximately USD200 billion.

It would come two years after British American Tobacco Plc (BATS.L) bought out Reynolds American Inc for USD49 billion, underscoring how the decline in cigarette smoking globally is pushing tobacco companies to seek scale and pool resources in their development of alternative products.

Under the terms of the all-stock merger being discussed, Altria shareholders would receive no premium and own between 41% to 42% of the combined company, with Philip Morris shareholders owning the remainder, according to a source familiar with the matter who was not authorized to discuss the details publicly.

The board of the combined company would be split evenly between Philip Morris and Altria directors, the source said. If the deal negotiations prove successful, an agreement could be reached by the end of September, the source added.

The two U.S.-headquartered companies separated 11 years ago to focus on different geographic markets, at a time when tobacco stocks generated steady yields. Since then, the industry has been disrupted by a move away from traditional smoking into e-cigarettes and vaping.

The two have responded with new offerings. Philip Morris, which operates outside the United States, has developed a heated tobacco product called iQOS. Altria, which operates in the United States and still sells Marlboro in the country, acquired a 35% stake in vaping company Juul Labs Inc last year for USD12.8 billion.

Some analysts and investors fretted that the lack of geographic overlap between the two companies could limit the value of operational synergies. Philip Morris and Altria shares ended trading on Tuesday down 7.8% and 4%, respectively, giving the companies market capitalizations of USD112 billion and USD84.5 billion.
Author:Anna Larionova
Tags:film extrusion, BOPP films, cigarettes.
Category:General News
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