Plans to reunite Big Tobacco in a merger between Altria (MO) and Philip Morris International (PMI) were canceled on Wednesday, with the industry facing its greatest regulatory threat in decades as the Food and Drug Administration (FDA) mulls banning flavored e-cigarettes.
- The $200 billion merger had been thrown into uncertainty after the recent FDA announcement, which raised the prospect of further federal and state regulation of vaping.
- Both companies had invested in e-cigarettes to try and offset declining sales of traditional cigarettes: Altria paid $12.8 billion for a 35% stake in Juul last year, while PMI invested more than $6 billion in a heated tobacco device called Iqos.
- Analysts had predicted that a U.S. flavored e-cigarette ban would mean that the merger had become more important than ever for Altria, who needed PMI’s global access to “ distribute Juul to the developed markets, all of which have varying rules and regulations,” CFRA Research analyst Garret Nelson told the New York Times.
Crucial quote: Philip Morris International CEO, André Calantzopoulos, said: “After much deliberation, the companies have agreed to focus on launching IQOS in the U.S. as part of their mutual interest to achieve a smoke-free future.”
Key background: The mega merger would have reunited Altria, maker of the Marlboro cigarettes, with Philip Morris International which was spun out in 2008. The pair planned to team up to market Philip Morris International’s IQOS e-cigarette. PMI’s big bet is that IQOS would become the future of vaping, and would win over cigarette smokers.