Olczak: PMI-Altria Merger off the Table

Philip Morris International is no longer pursuing a merger with Altria Group, reports Financial Times.

At the Financial Times Global Dealmaking Summit on Nov. 9 PMI CEO Jacek Olczak said that the “chapter with Altria is closed,” the newspaper reported.

PMI was spun off as a separate publicly traded company from Altria in 2008. Altria operates in the United States and PMI operates in non-U.S. markets.

Industry analysts and observers have speculated for years that the two companies might eventually reunite as they both look to diversify their product lines and offset slow declines in cigarette sales.

The two companies said in August 2019 that they were discussing a possible all-stock “merger of equals.” However, those negotiations ended a month later without any deal.

At the time, Howard Willard, then Altria’s chairman and CEO, said, “While we believed the creation of a new merged company had the potential to create incremental revenue and cost synergies, we could not reach agreement.”

During the recent Global Tobacco & Nicotine Forum in London, analysts said reunification of the companies was unlikely because of PMI’s public commitment to derive more than 50 percent of its net revenues from smoke-free products by 2025. Because Altria currently receives a smaller share of its earnings from such offerings than does PMI, it would be harder for the combined entity to meet PMI’s target, they noted. What’s more, many PMI investors like the fact that they can currently choose whether or not they want exposure to the uncertain U.S. market—an option that would no longer be available after any merger.

Altria holds exclusive rights to sell PMI’s IQOS tobacco-heating device in the U.S. However, the U.S. International Trade Commission ruled in late September that Altria and Philip Morris International must halt imports and sales of IQOS because it infringes two patents held by R.J. Reynolds Tobacco Co. The decision is under administrative review and could be overturned.