Comments on: Philip Morris buys USST?

By: John Rolfe

John Rolfe — Mon, 20 Oct 2008 23:21:02 +0000

The FTC does not define the industry for anti-trust reasons in terms of shelf or counter space, only in terms of distinct product categories e.g., smokeless vs. cigarettes. With virtually no presence in smokeless, Altria is free to do what it did with no presence in machine-made cigars. How products are sold through distribution and retail has historically not figured in a determinant of antitrust issues – just market-share imposed limits by category at both the Federal and State levels.

You are, however, raising a potentially important issue going forward: since manufacturers will be further encouraging consumers of different categories to switch (principally cigarettes to smokeless) and products like NRT are blurring with orbs, sticks and strips etc. the relevant comparison and distinctions might be more appropriately related to nicotine delivery and not to tobacco products. This could change the anti-trust issue.

By: The OTP Kid

The OTP Kid — Mon, 20 Oct 2008 21:43:05 +0000

The Feds approved the merger in principle and the aquisition will take place. Listen, once you support FDA, you are free to do a lot of things. Next up, the Feds will support NACS position on reduction of credit card interchange fees. Take that to the bank! (pun intended)

By: Bluesinger

Bluesinger — Thu, 11 Sep 2008 03:13:35 +0000

Did I miss something, or did this all read like a repeat of what happened 9 months ago with the ‘takeover’ of Middleton, and look what is happening to them: dismissal of the sales force followed by the dismissal of some office personnel (duplicate synergies) I believe was the phrase. USST people, hope that you and your customers do not get treated as Middleton and its customers are. I should say that this is what I have heard recently.

Ok, I don’t know all the legal stuff but in reading everything about Altria and how they are buying a manufacturer in all the various tobacco products, how can one company legally do what appears to be, interfering/controlling what and how much a customer buys which essentially controls customers’ growth or decline. Also, at what point is a company considered to have too big a share of a particular market ? Wouldn’t that be a monoply which is what caused the break up of Bell-tel and AT&T years ago? Just curious.

By: Big Tuna

Big Tuna — Thu, 11 Sep 2008 01:32:34 +0000

It’s with much sadness that I see this transaction occur as the sales folks from USST are just real down to earth great people. They are just great to work with and one of the joys of my job working in the retail industry has always been highlighted by the relationships with “real” people from USST. The moist tobacco industry will dramatically change as the PM persona which is very different will take the enjoyment out of the business. It’s a shame that the folks at USST will most likely be treated like the fine folks at Middleton. To all the great folks at USST I am sad as your energy & enthusiasm will be greatly missed.

By: TAZ

TAZ — Mon, 08 Sep 2008 13:39:51 +0000

ALTRIA ACQUIRING UST FOR $11.7 BILLION
—————————————————————–
RICHMOND, Va. — As expected, Altria Group Inc. and UST Inc.
officially announced today that they have entered into a definitive agreement for Altria to acquire all outstanding shares of moist smokeless tobacco (MST) manufacturer UST. The transaction is valued at approximately $11.7 billion, which includes the assumption of approximately $1.3 billion of debt.

UST provides Altria with the Copenhagen and Skoal brands in the MST category. It will also acquire Ste. Michelle Wine Estates.

The transaction is subject to UST shareholder approval and customary regulatory approvals. The UST acquisition is expected to grow and diversify Altria’s operating income and net revenues.

Under the terms of the agreement, UST will become a wholly owned subsidiary of Altria. Following the completion of the transaction, Murray S. Kessler, chairman and CEO of UST, will be named vice chair of Altria, reporting directly to Michael E.
Szymanczyk, chairman and CEO of Altria, and will oversee the integration.

New York City-based Altria is the parent company of Richmond, Va.-based Philip Morris USA Inc. The brand portfolio of Altria’s tobacco operating companies includes brand such 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. and Ste.
Michelle Wine Estates. U.S. Smokeless Tobacco produces and markets 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.

By: koolkat

koolkat — Mon, 08 Sep 2008 01:56:00 +0000

Inevitable proposition especially since cigarette volume continues to decline and their moist marlboro has not performed very well. Plus one must realize there are others that would have interest in USST. PM can use their contract levels to make it tough on all the other players in the moist tobacco space.

By: Copenhagen Charlie

Copenhagen Charlie — Sat, 06 Sep 2008 17:21:17 +0000

I agree but the interesting issue is why did USST pull out of the conference on Thursday? Maybe they are shopping and did not want to discuss the softness of their recent business or the negotiations.

By: John Rolfe

John Rolfe — Sat, 06 Sep 2008 17:12:51 +0000

But clearly since Altria denied the rumor after the markets closed Friday, the $10 billion may be a bit stiff even for them. It will be interesting to see where UST’s stock goes when the markets open Monday morning and whether there are any other potential suitors with cash in this range.

By: Copenhagen Charlie

Copenhagen Charlie — Fri, 05 Sep 2008 19:31:25 +0000

Seems like it will happen especially since there is a real number attached this time!

By: The OTP Kid

The OTP Kid — Fri, 05 Sep 2008 18:07:12 +0000

Word on the street is that the purchase will be announced later today, probably after the markets close.