Deal would merge the Marlboro maker with the parent company that sold it off a decade ago.
Tobacco companies Philip Morris and Altria are discussing a merger that would reunite the Marlboro maker with the parent company that sold it off a decade ago.
The two companies confirmed they were discussing an all-stock merger but said there was no guarantee a deal would be reached. They added they would “make no further comment regarding the discussions unless and until it is appropriate to do so”.
Altria spun off Philip Morris International (PMI) in 2008. It sells Marlboro cigarettes in the US and has largely focused on its domestic market while PMI has focused on selling cigarettes overseas.
PMI was valued at $121bn before the news and Altria at $88bn. A possible merger has been predicted by analysts who have speculated the two companies could get back together as they fight falling cigarette sales and the rise of vaping.
Last year Altria paid $12.8bn for a 35% stake in Juul Labs, maker of the popular electronic-cigarette. Over the past year the e-cigarette category has grown 97% to $1.96bn and, according to Wells Fargo, Juul’s sales grew 783% between June 2018 and June this year, reaching $942.6m.
Altria has also made moves to enter the cannabis market as more US states legalize the drug. Last December Altria bought a 45% stake in Canadian cannabis firm Cronos Group for about $1.8bn. Cannabis is now legal in Canada and fully legal in 10 US states and the District of Columbia.
PMI, too, has moved to diversify away from cigarettes and has invested heavily in Juul-rival iQOS, a device that heats tobacco rather than burning it. The device is now on sale in 48 markets around the world and will be launched in the US next month after winning approval from the US Food and Drug Administration. PMI said it has about 11 million iQOS users globally.
In July PMI lowered its earnings forecast and warned the company was facing lower than expected demand and shipment volumes would decline 2% in 2019.
Rival British American Tobacco (BAT) finalized its takeover of Reynolds American Incorporated in 2017, creating the world’s largest tobacco company. That merger too was driven by falling sales and the rise of e-cigarettes and vapes.
According to the World Health Organization (WHO) about 1.1 billion peoplesmoked tobacco in 2015. WHO estimates smoking leads to 6 million deaths a year. Thanks to public health initiatives, taxes and other regulations smoking is on the decline in many parts of the world but WHO points out that smoking is on the rise in the eastern Mediterranean region and across much of Africa.
PMI’s shares fell 8% following confirmation of the talks, while Altria’s shares rose by nearly 8%.