RICHMOND, Va. -- Altria Group Inc. and UST Inc. officially announced yesterday that they have entered into an agreement for Altria to acquire all outstanding shares of UST, the world's leading moist smokeless tobacco (MST) manufacturer. Under the terms of the agreement, shareholders of UST will receive $69.50 in cash for each share of common stock held. As reported in a CSP Daily News Flash, the transaction is valued at approximately $11.7 billion, which includes the assumption of approximately $1.3 billion of debt. Under the terms of the agreement, UST will become a wholly owned subsidiary [image-nocss] of Altria.
"The combination of Altria and UST creates the premier tobacco company in the United States with leading brands in cigarettes, smokeless tobacco and machine-made large cigars," said Michael E. Szymanczyk, chairman and CEO of Altria. "We are excited about this strategic and financially attractive acquisition as it will enhance our ability to deliver superior shareholder return that is expected to exceed our 12% goal. This transaction is consistent with our growth strategy of making disciplined investments in adjacent categories. UST provides Altria with the leading premium brands, Copenhagen and Skoal, in the highly profitable MST category. We will also acquire Ste. Michelle Wine Estates, a premium wine business, as part of the transaction."
Murray S. Kessler, chairman and CEO of UST, said during the investors' call, "We're going to learn a lot about each other over time and find out the strengths and weaknesses of each other. There are world-class organizations on both sides and successful companies on both sides.... There is a remarkably similar culture and value system and belief in brand-building, and I think those efficiencies will play out over time. It's really a great combination." Kessler will be named vice chair of Altria, reporting directly to Szymanczyk, and will oversee the integration.
"I don't think there's any question that both of these companies are doing just fine. But there's also no question [that] when you put them together, the consolidation creates an extraordinary amount of value for consumers and for shareholders. And that's why it's smart to do this. It's not that one can't perform without the other. When you put them together, you can get much more value than when they're apart," Szymanczyk added during the call.
Upon completion of the transaction, Altria's operating companies will offer a diverse range of tobacco products with brands including Marlboro, Copenhagen, Skoal and Black & Mild.
"This all-cash transaction delivers compelling value to UST's shareholders," said Kessler. "UST's growth strategy will clearly be enhanced by Altria's resources and infrastructure."
Based on UST's three-month average stock price of $53.90, this offer represents a premium of 28.9% to UST's shareholders. The transaction is subject to UST shareholder approval and customary regulatory approvals.
"We are pleased that Murray has agreed to stay on board during the integration period to help complete the transition," said Szymanczyk. "U.S. Smokeless Tobacco Co. is the leading and most profitable moist smokeless producer and marketer due to the efforts of Murray, his management team and employees. They have a deep understanding of the growing smokeless tobacco category. It is my pleasure to welcome UST's talented employees to the Altria family of companies."
New York City-based Altria owns 100% of each of Philip Morris USA Inc., Richmond, Va.; John Middleton Co., Royersford, Pa.; and Philip Morris Capital Corp. In addition, Altria holds a 28.5% economic and voting interest in SABMiller plc. The brand portfolio of Altria's tobacco operating companies includes such names as Marlboro, Parliament, Virginia Slims, Basic and Black & Mild.
Stamford, Conn.-based UST Inc. is a holding company for its principal subsidiaries, U.S. Smokeless Tobacco Co., Greenwich, Conn.; and Ste. Michelle Wine Estates, Woodinville, Wash. U.S. Smokeless Tobacco is the leading producer and marketer of MST products including Copenhagen, Skoal, Red Seal and Husky. Ste. Michelle Wine Estates produces and markets premium wines sold nationally under 20 different labels including Chateau Ste. Michelle, Columbia Crest, Stag's Leap Wine Cellars and Erath, as well as exclusively distributes and markets Antinori products in the United States.
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