Altria Group reached an agreement to buy UST, the maker of Skoal and Copenhagen smokeless tobacco, for about $10.2 billion, people briefed on the matter said Sunday night.
The deal, for $69 a share, could be announced as soon as Monday, these people said. It would be Altria’s first major deal since it spun off its international tobacco business in March, and it may prompt more consolidation in the tobacco industry.
The price tag represents an almost 28 percent premium to UST’s closing price on Thursday, the day before The New York Times reported that the companies were in negotiations.
Shares in UST rose 25 percent on Friday, to $67.55. Shares in Altria rose about 1.4 percent on Friday to $20.95. The move by Altria, formerly known as Philip Morris, will come as no surprise to analysts, who said on Friday that the combination made sense.
Cigarette sales have been declining for decades. Altria said in July that it expected shipments to fall 3.5 percent this year, more than it had initially projected. Rising cigarette prices and higher federal excise taxes are expected to contribute to that drop, analysts say.
But smokeless tobacco has grown about 7 percent annually over the last four years.
Acquiring UST, formerly the U.S. Tobacco Company, would significantly strengthen Altria’s presence in the smokeless tobacco business. To date, Altria’s only major competitor to Copenhagen and Skoal has been Marlboro-branded moist smokeless tobacco and snuff, which have not been popular in the United States.
Altria’s marketing and distribution muscle may also lift UST’s fortunes, as the smaller company faces increased competition on the lower end of the smokeless tobacco market. With consumer spending falling, many analysts and industry executives expect that buyers will spend less on premium products and switch to lower-end smokeless tobacco.
In a way, Altria is playing catch-up with its biggest competitor, Reynolds American. In 2006, Reynolds bought Conwood, the second-largest maker of smokeless tobacco after UST, for $3.5 billion.
Analysts speculated that Altria’s deal might prompt Reynolds American to respond by making a bid for Lorillard, the other major American tobacco company.
UST also owns Ste. Michelle Wine Estates, which is one of the 10 largest producers of premium wines in the United States.
