The possible reunion of Henrico County-based tobacco giant Altria Group Inc. with its former subsidiary, Philip Morris International, is no longer being considered, according to one report.
The Financial Times, a London-based publication, reported this week that the CEO of Philip Morris International said his company will no longer pursue a merger with Altria, the parent company of top U.S. cigarette maker Philip Morris USA.
Jacek Olczak, Philip Morris International’s CEO, said at the Financial Times Global Dealmaking Summit on Tuesday that the “chapter with Altria is closed,” the newspaper reported.
Philip Morris International was spun off as a separate publicly traded company from Altria in 2008 and does business only in overseas markets, while Altria operates businesses in the United States through subsidiaries such as Philip Morris USA, U.S. Smokeless Tobacco Co. and cigar maker John Middleton.
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Industry analysts and observers have speculated for years that the two companies might eventually reunite as they both look to diversify their product lines and offset slow declines in cigarette sales.
The two companies said in August 2019 that they were discussing a possible all-stock “merger of equals.” However, those negotiations ended a month later without any deal.
At the time, Howard Willard, then Altria’s chairman and CEO, said, “While we believed the creation of a new merged company had the potential to create incremental revenue and cost synergies, we could not reach agreement.”
Altria said Wednesday that the company does not comment on speculation about mergers and acquisitions.
“We’re focused on achieving our vision of responsibly leading the transition of adult smokers to a smoke-free future,” Altria spokesperson Steve Callahan said.
The Fortune 500 company is one of the Richmond region’s largest employers. It operates the only Philip Morris USA cigarette plant in the U.S. in South Richmond. The company controls about 50% of the U.S. cigarette market and has the top-selling brand, Marlboro.
Philip Morris International has 44 manufacturing facilities, with plants in multiple countries including Indonesia, Poland, Russia and Italy. It also contracts with more than two dozen third-party manufacturers.
The two companies have been collaborating on the sale of IQOS, an alternative to conventional cigarettes. IQOS is a battery-powered device that heats tobacco instead of burning it.
Altria holds exclusive rights in a deal with Philip Morris International to sell IQOS in the U.S.
However, the U.S. International Trade Commission ruled in early October that Altria and Philip Morris International must halt imports and sales of IQOS because it infringes two patents held by their top competitor, Winston-Salem, N.C.-based R.J. Reynolds Tobacco Co. The decision is under administrative review and could be overturned.