MO stock is in the green today after Altria Group (NYSE:MO) announced it had ended merger talks with Philip Morris International (NYSE:PM).
The two tobacco heavyweights were once one company; however, they split over a decade ago due to slumping MO stock and heavy pressure from regulatory bodies with regard to tobacco’s role in contributing to cancer. Reports emerged last month that the two firms were in talks to reunite, which had a negative effect on both stocks due to skepticism from investors on both sides of the deal. News that those reunification talks have now ended was well met by investors today.
Some analysts had been optimistic about the potential of the deal due to the market access it would provide both companies. Since the split, PMI had been responsible for overseas sales of the company’s flagship Marlboro cigarettes, while Altria handled US operations. Atria had also invested significantly in the vape market by purchasing a 35% stake in Juul for about $13 billion USD. Yet it appears that the Juul association was the final nail in the coffin for this deal, amid mounting controversy regarding the safety of vapes.
Concerns about Juul have been heaping pressure on MO stock, with Juul CEO Kevin Smith stepping down yesterday amid intense public backlash towards the company’s products. Smith will be replaced by Kevin Crostwhaite, former Chief Growth Officer at Altria. The vape market in the US has become increasingly uncertain after President Donald Trump announced a crackdown on flavored e-cigarettes, as well as reports of nine deaths being directly linked to vape related lung illnesses.
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Altria will continue to uphold its deal with Philip Morris to sell its iQOS vaping devices in the US, despite the end of merger talks and heavy scrutiny towards vaping. Altria CEO Howard Willard lamented the collapse of the merger talks today, saying he “believed the creation of a new, merged company had the potential to create incremental revenue and cost synergies.” MO stock is currently valued at $40.66, while PM stock is at $75.29.
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