In a somewhat shocking move, two giant tobacco-related companies have announced their intent to seek an all-stock “merger of equals,” despite the notable differences in market caps.
As a reminder, the companies had been one until 2008, when they divided their operations.
Philip Morris International Inc. (NYSE: PM) today announced that it is in discussions with Altria Group, Inc. (NYSE: MO) regarding a potential all-stock, merger of equals.
There can be no assurance that any agreement or transaction will result from these discussions. Additionally, there can be no assurance that if an agreement is reached, that a transaction will be completed. Any transaction would be subject to the approval of the two companies’ boards and shareholders, and regulators, as well as other conditions. Philip Morris International intends to make no further comment regarding the discussions unless and until it is appropriate to do so.
RBC Capital Markets’ analyst Nik Modi noted that there are four main strategic reasons why the companies should come get back together:
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Geographic alignment with international competitors; both of PM’s global competitors (BAT and Imperial) have exposure to the U.S.
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PM would get use of U.S. profit pool for a stable source of cash that could be returned to shareholders
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Diversifying PM’s operations to U.S. would help lessen impact of FX on EPS
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Combination allows for the full economic benefit of iQOS in the U.S. and global access for JUUL
The reaction in the shares of this “merger of equals” is notable…
Shares of Altria are up 9% and Philip Morris is down over 3%.
While one might believe the chances of this deal passing anti-trust regulators, it is perhaps opportune timing before ‘President Warren’ crushes any hopes and dreams in the future.
Developing…
via ZeroHedge News https://ift.tt/2zqwTy8 Tyler Durden