A decade after a split, the Marlboro men seek a reunion
New York — The Marlboro men are discussing a reunion as the number of smokers continues to decline worldwide.
Altria confirmed Tuesday that it is in talks to merge with Philip Morris International, more than a decade after splitting itself into two companies.
Altria has exclusively sold Marlboro cigarettes and other tobacco brands in the U.S., while Philip Morris has handled international sales.
The combined company would have a market capitalization of over $200 billion, making it the largest publicly traded tobacco company worldwide.
Philip Morris said Tuesday that there is no guarantee of success in what would be an all-stock deal. But analysts said the merger is likely to pass muster with anti-trust regulators.
Both companies have been investing in alternatives to traditional cigarettes amid declining use.
The companies are already partnering on the U.S. launch of a heat-not-burn cigarette alternative, iQOS, made by Philip Morris. Separately, Altria has taken a roughly $13 billion stake in vaping giant Juul, betting on more smokers switching to electronic cigarettes.
If successful, the merger would reunite the two arms of one of the tobacco industry’s oldest and biggest brands.
Altria, based in Richmond, Virginia, spun off its international operation in 2008 amid waves of lawsuits and government scrutiny in the U.S. The breakup gave Philip Morris International more leeway to pursue sales growth in emerging markets. Anti-tobacco groups accused the company of maneuvering to unleash its marketing machine on nonsmoking women and children in poor, developing countries.
Since the split, Philip Morris has churned out new Marlboro-branded products catering to local tastes in Asia, Europe, Latin America and other regions, even as both companies invest in alternatives to traditional cigarettes.
Wells Fargo analyst Bonnie Herzog said the combination “would make a lot of sense,” allowing the companies to cooperate amid the “global arms race” for non-traditional tobacco products.
The merger has the potential to super-charge Juul’s efforts to expand overseas, bolstered by the global marketing power of Philip Morris. The cash infusion from Altria could also help the new company ramp up marketing of the iQOS device in the U.S. and overseas.
Earlier this year Altria executives estimated annual U.S. cigarette volumes would decline between 4% and 6% through 2023, sending company shares down sharply.
Philip Morris, based in New York, has been rebranding itself with new products and the slogan “Designing a smoke-free future.”
The company sells its battery-powered iQOS device in 40 countries. The iQOS heats tobacco without burning it. It will soon be sold in the U.S. under a licensing agreement.
While U.S. regulators permitted the sale of the device, they have not yet ruled on whether iQOS can be marketed as less harmful than cigarettes.
Juul, of which Altria owns a 35% stake, has quickly grown to dominate the U.S. vaping market. Its high-nicotine flavored pods have helped Altria offset declining cigarette sales, but also attracted new scrutiny.
Juul is being investigated by members of Congress, the Food and Drug Administration and state attorneys generals amid allegations that its early marketing overtly targeted teenagers. Since the product’s launch, the portion of high school students using e-cigarettes has mushroomed to 20%, according to U.S. survey figures released last year.
On Tuesday the North Carolina attorney general, who sued Juul in May, announced eight new lawsuits targeting other e-cigarette companies.
“Our complaints allege that these eight e-cig companies are helping to fuel an epidemic of vaping among high school and middle school students,” said Josh Stein. “One look at their marketing materials demonstrates just how egregious their sales tactics are — with flavors like cotton candy, gummy bear, unicorn, and graham cracker, they’re clearly targeting young people.”
Smoking causes more than 480,000 deaths each year in the U.S, even though smoking rates have been declining for decades. Approximately 14% of U.S. adults smoke, according to government figures. That’s down from the more than 40% of adults who smoked in the mid-1960s.
On a global level smoking is blamed for some 7 million deaths.