U.S. Markets open in 8 hrs 19 mins

Big Merger Alert: Philip Morris and Altria Look To Reunite

Say Contributor

Two of the biggest names in tobacco are looking to get back together, after going separate ways a decade ago. Smokin’ Philip Morris International is in discussions with Altria about a possible all-stock merger. The details are currently unknown, but insiders told CNBC that a 51%-49% split in Philip Morris’ favor has been discussed. In 2008, Altria spun Philip Morris International off in order to focus on American cigarette and tobacco sales, while PMI focused on overseas markets. At the time of the split, cigarette sales were declining in America and rising internationally. Around the World Cigarette sales have been steadily declining for years, hurting the stock prices of tobacco companies. Today, Philip Morris’ shares lost nearly 8%, while Altria’s fell about 4%. The move to reunite is being seen as the tobacco industry fortifying itself to deal with a changing consumer landscape, and both companies are moving to adapt with the times. Altira has invested 35% in the hugely popular and hugely criticized electronic cigarette company JUUL. Not to be outdone, PMI has spent more than $6 billion developing a heated tobacco device called iQOS that’s available around the world and was cleared for U.S. sale by regulators in April. Crown JUUL? When is a product too popular? When politicians and health experts are blaming you for getting the kids so hooked on tobacco that they display signs of addiction, that’s one sign. JUUL is the leading electronic cigarette brand, and it has become so big that the New York Times reported that 21% of high school students say they’ve vaped within the past 30 days. In response to the product’s popularity, the Food and Drug Administration began cracking down on e-cigarette sales, the Center for Disease Control announced an investigation into a “cluster” of lung illnesses that could possibly be related to e-cigarette use, and states such as Connecticut and North Carolina have begun investigating the company’s attempts to market to young people via the product’s fruit flavors such as mango. Feeling the heat, JUUL Labs has raised $325 million in equity from investors to expand its operations across the globe, and the possible merger seems to indicate Altria knows it needs to find a new market for its product. -Michael Tedder Photo: Mike Segar/REUTERS