Market Overview

Altria, Philip Morris Discuss Reunion Merger: Analyst Says Deal Makes 'Strategic Sense'

Altria, Philip Morris Discuss Reunion Merger: Analyst Says Deal Makes 'Strategic Sense'

Cigarette maker Philip Morris International Inc. (NYSE: PM) said Tuesday it's in discussions about the possibility of reuniting with industry leader Altria Group, Inc. (NYSE: MO) in a possible blocbuster all-stock merger that would create a massive $200-billion-plus company.

Altria spun PM off more than a decade ago, and the two companies sell the same cigarette brands, with Altria in the U.S. market and Philip Morris selling them in other international markets. Among their brands: the American cigarette icon Marlboro.

Both companies have seen declining sales as tobacco use has shrunk in the United States, and faced pressure from alternatives including e-cigarettes.

Significant Uncertainty

The breakup was a success for shareholders of both companies, but RBC Capital Markets analyst Nik Modi said in a Tuesday note to investors that the last two years "have created significant uncertainty, and the future of tobacco is a lot more dynamic than it was in 2008," when the breakup occurred.

"Given the changing global consumption/regulatory landscape, we believe it makes strategic sense for the Marlboro, IQOS and JUUL brands to have a unified global strategy run by one company," the analyst said. 

RBC has an Outperform rating on Altria with a $68 price target.

Not A Done Deal

PM said in a statement that any transaction, which isn't a done deal, would be subject to approval of both comapnies' shareholders and boards, as well as regulators. 

Price Action

Altria shares were down 2.44% at $45.97 at the time of publication, while Philip Morris shares were falling by 4.55% to $74.19.

Related Links:

The Positives, Negatives Of Altria's $12.8-Billion Investment In Juul Labs

Tobacco Stocks React As FDA Investigates Reports Of Seizures After Vaping

Latest Ratings for PM

Jan 2020MaintainsOverweight
Dec 2019MaintainsOverweight
Dec 2019DowngradesBuyNeutral

View More Analyst Ratings for PM
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Posted-In: cigarettes E-Cigarettes Nik Modi RBC Capital MarketsAnalyst Color M&A Top Stories Analyst Ratings Best of Benzinga


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