Philip Morris International (PMI) and Altria are discussing a merger to reunite the two tobacco giants 11 years after they parted ways.
The deal would create the world’s largest tobacco group. When news of the talks initially broke, the stock market valued a merged business at over $200bn. Shares in both companies subsequently fell, however.
With cigarettes in decline and the vaping category growing, a merged company would pretty much have all its bases covered no matter what direction the market for nicotine products took in the future.
Altria has a 35% stake in JUUL, the US brand that is becoming increasingly dominant in vaping.
PMI, on the other hand, sunk $4.5bn into developing reduced risk alternatives to combustible tobacco. The major outcome of this was the Iqos ‘heat not burn’ system, which it markets alongside a range of more conventional e-cigs.
On top of that, both companies produce Marlboro – the world’s biggest cigarette brand – with Altria supplying the US and PMI the rest of the world.
According to industry analyst Bonnie Herzog, of Wells Fargo, Altria already plans to launch Iqos in the US.
She also said PMI would be an ideal partner for JUUL in its drive for international expansion. The vaping brand recently attracted a further $325m from investors for that very purpose, following an initial injection of $1.25bn a year ago.
In a statement, PMI confirmed it was in talks with Altria but intends to make no further comment “unless and until it is appropriate”.
Any deal would be subject to the usual regulatory and shareholder approval.
