Altria in advanced talks to buy UST for $10 bln: report
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CHICAGO (Reuters) - Altria Group Inc is in advanced talks to buy Skoal and Copenhagen smokeless tobacco maker UST Inc for $10 billion, the New York Times reported on Friday, citing people close to the negotiations.The long-rumored acquisition of UST would give Philip Morris USA-parent Altria the largest player in the U.S. smokeless tobacco market, albeit one that has seen its market share pressured as cash-strapped consumers trade down from UST's higher priced products.Altria has long been seen as the likely buyer of UST as part of a strategy to expand into other tobacco products while Marlboro maker Philip Morris USA's core cigarette market continues to decline.U.S. cigarette consumption has fallen steadily since 1981 as more bans on smoking in public areas are put in place, health messages against cigarettes become more prevalent and cigarette makers face marketing limitations from the 1998 tobacco litigation settlement with the states.Sources told Reuters in February that Altria could reach a deal to acquire UST within months, but that price was the toughest sticking point.Some analysts think that at some point UST will have to cut its prices in order to compete with lower-priced products. So far, UST has used only targeted promotions in certain markets to try to protect its market share.Altria rival Reynolds American Inc bought Grizzly smokeless tobacco maker Conwood in 2006 and has also tested smokeless tobacco products under the Camel brand, adding to the competitive pressure on UST.Altria itself has also been test-marketing some smokeless tobacco products, while also branching out into cigars with the acquisition of John Middleton Inc, which was announced in November.An Altria spokesman did not return calls seeking comment early on Friday and UST also could not be reached. The New York Times said Altria spokesman David Sylvia declined to comment on speculation of the talks.UST Chief Executive Murray Kessler and another executive pulled out of a planned presentation at the Lehman Brothers Back-to-School conference on Thursday, prompting speculation that a deal could be imminent and initially sparking a rally in UST shares.UST spokesman Tom Fitzgerald told Reuters that the cancellation was due to a scheduling conflict, though he declined to say what the conflict was. UST had confirmed its intention to attend the conference two weeks ago.UST shares closed down 4 cents at $54 on Thursday on the New York Stock Exchange, after being up as much as 5.8 percent earlier in the day. Altria shares closed at $20.66, down 2.8 percent.(Reporting by Brad Dorfman; Additional reporting by Saumyadeb Chakrabarty in Bangalore; Editing by Quentin Bryar)
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