Altria to buy UST!

Earlier postings on Tobacco Today – some months ago predicted PM USA would acquire either Swedish Match or USST to gain a significant entry into the smokelsss market. Evidently they’ve made their move – and we think its a smart move for PM USA.

They gain immediate participation in large portions of the smokeless category with big market shares. PM also gains significant product development access further enabling it to gain future synergies.

So who will acquire Swedish Match?

22 comments ↓

#1 TAZ on 09.08.08 at 8:40 AM

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.

#2 Bluesinger on 09.10.08 at 4:06 PM

In reading the announcement, whenever the word synergies appears, and it is followed by the words sales, adminstration, etc., a nervous twinge occurs. Hope the people in those areas are getting their resmes ready. It reads very close to what was in the announcement about Middleton.

What say you all.

#3 been there-done that on 09.12.08 at 10:41 AM

Same ol’ speech they gave the Middleton people. PM will rape USST as they have Middleton.

#4 Cowboys Stink on 09.12.08 at 10:46 AM

Here comes the price war! Maybe they will be able to expand the market and increase usage with their big marketing ability, or they will ruin an American classic..

#5 Copenhagen Charlie on 09.13.08 at 10:21 AM

Those who think this is a good move are only those on wall street. This is a destructive move for the actual industry. They have one brand and that is Marlboro. They thought Marlboro moist was a good product. Can you imagine when they test the product using USST’s standards and find it to be a price value brand like Husky! I must say I’m very disappointed for the trade. Retailers unfortunately never stand up to PM and just let them manipulate their business. I wish good luck to all the USST folks as they will be replaced by folks who know not nor care not about the retailers business. I mean the word on the street is that they have already screwed up Black & Mild. I look for PM to push for weight based taxation as a easy move and would not be surprised at all if you saw a Marlboro Friday hit the premium side of the moist tobacco industry!

#6 xxx on 09.13.08 at 11:19 AM

Charlie, you are so correct. PM manipulates the market and the retailers. And you saw what they did to Middletons sales force – USST’s sales force will be the next to go.

#7 Anonymous on 09.13.08 at 11:19 AM

x

#8 Bill Godshall on 09.13.08 at 2:57 PM

From a public health perspective, Altria’s proposed acquisition of UST (it may face anti-trust challenges) poses enormous opportunities and threats.

Altria could use the acquisition to protect its huge cigarette empire from growing market competition by less hazardous smokefree tobacco products (as most new smokefree tobacco users are smokers, and UST’s Skoal is the leading entry brand). That would be a disaster for tobacco harm reduction.

Alternatively, Altria could utilize the acquisition of UST to expand the marketing of Skoal and Copenhagen to smokers as alternatives to cigarettes.

David Adelman is predicting that Altria will soon cut the price of Skoal and Copenhagen, which should increase sales and encourage more smokers to try the products.

Public health would benefit if Altria publicly acknowledged that smokefree tobacco products are less hazardous alternatives to cigarettes, continued UST’s target marketing of smokers, and endorsed amending the FDA tobacco legislation to inform tobacco consumers of the comparable risks of different tobacco products, and encourage (instead of discourage) the development/marketing of less hazardous smokefree tobacco products to smokers.

#9 IRON CITY SMOKER on 09.22.08 at 12:57 AM

I was pretty amazed at hearing this news from a friend at USST. He is longtimer and the ranks are pretty disturbed as they really see the two cultures just not mixing. He mentioned that USST has hired a lot of folks that PM would not have hired as they would have not fit into the robotic nature of a PM sales representative. Is this not a serious blow to the fun side of the industry?

#10 Tobocatman on 10.02.08 at 1:45 AM

Folks at USST should not be surprised. It was general knowledge that senior management had contracts that protected them in the case of this happening! It was Murray Kessler’s objective but in my mind it was not due to anything spectacular at USST but it was the inability for PM to provide a quality product. If you ever tasted the Marlboro Moist crap you’d know how bad it was! Paying a dollar a can was still too much. But you will see some volume because get real folks they have the prime real estate and this my friends is why one day PM will destroy the industry because of their self centered desire to tread on all and any that get in their way. They probably are hoping that RAI buys Lorillard as Lorillard is the only company that challenges PM. Newport is the real deal folks!

#11 Snowboarder on 10.14.08 at 5:09 PM

I was at the NACS show last week and I now believe what folks have said about the Marlboro Moist product. It is really bad. So many other choices. I see why they needed to buy USST. But I will still keep using my Grizzly. Great price and great flavor!

#12 Gamblingman on 12.04.08 at 12:14 AM

I have to agree with many that have made comments already – it made sense and it was anticipated but that does not mean its good for the industry.

#13 The Dark Knight on 12.16.08 at 3:05 AM

It seems like a lot of people are just speaking against Philip Morris but I think this purchase is actually a good move as there are a few things that PM does so much better than USST as they treat every retailer the same in that they offer a consistency in their retail leaders plans that USST has no clue about. They (USST) do not treat all retailers the same and do not offer all folks the same opportunity. They offer programs to who they choose to and if you are in an area that has no sales representative calling on you you are just plain out of luck. They do not visit locations on a consistent basis as does Philip Morris. I long to be able to compete against my competition on the same playing field. Another thing I look forward to is having a rep visit me on a consistent basis. The other benefit I see is that PM in the past put in place an off-invoice program that affected all retailers. It is my hope that they will do the same with Skoal & Copenhagen. So I vote PM buying USST is a very good thing. USST will become a much more effective sales organization.

#14 Copenhagen Charlie on 12.20.08 at 4:30 PM

Looks like the Dark Knight has been drinking Kool Aid from the PM dispenser. Folks will see when PM just levels the boom like they did on the Middleton folks. If PM eliminates the USST sales force retail will be left with the most ineffective sales force in the business that being PM. Gotta wonder what the Dark Knight is thinking?????

#15 joe fonbone on 12.30.08 at 11:44 PM

Coppenhagen Charlie, your right about The Dark Knight. The only difference is….The PM folks will still have a job. What’s ineffective about that? By the way, Kool Aid was dumped by PM, and effectiveness tends to be measured by delivering a nice bottom line. I own PM and UST stock..the analyst seem to be very complementary about the PM Sales Force… what is it you know that they don’t?

#16 sdl on 01.11.09 at 10:12 AM

Just to set the record straight Black & Mild did not have a sales force. You really should get your facts straight before you post.

#17 BIG MO on 01.11.09 at 3:36 PM

sdl – I’m not sure what your looking at – JMI did have a sales force however they did not call on stores. Looks like your missing the distinction od sales reps calling on retail like USST and PM. If your referring to that your correct but I don’t that’s what is being referenced. So in a way retail thru the PM purchase of JMI the retail sector is now being serviced. I should know I now bring those programs to retail.

#18 a line of bull on 01.11.09 at 9:34 PM

If you believe that JMI did not have a salesforce for Black & Mild, just ask one of the 23 sales people that were released by PM. The JMI sales force called on wholesalers and chain store headquarters, not the individual stores.

#19 a line of bull on 01.11.09 at 9:35 PM

My last comment was directed to sdl – I am not sure where he/she is getting their information.

#20 SDL on 01.15.09 at 11:16 PM

Let me clarify. All the comments here referenced USST or PM sales forces calling on retail accounts. Middleton did not have a retail sales force.

#21 COPEWIFE on 01.29.09 at 5:28 PM

Good Luck to UST sales force. I’m not so sure any of you would want to work for PM anyhow, as they aren’t the “family oriented” company. They treat their retailers the same because they are like a bunch of brain-washed drones floating around . They can’t have a good repor with their retailers, because when the retailers are out of line with their contracts , they wouldn’t have the b____s to tell them they get screwed out of their money owed to them. PM’s day will come! And it will. ALL retailers need to stand up to them & tell them to shove their contracts.

#22 Anonymous on 06.28.09 at 1:29 PM

UST sales force – gone. Middleton sales force – gone. PM is ruthless.

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