Altria Group Inc. to Purchase UST Inc. for 5.22 Times Revenue

The Deal: Altria Group announced that it has reached an agreement to acquire UST Inc. for $69 per share, or about $10.2 billion. The deal price represents a premium of nearly 28 percent over UST's share price prior to the deal announcement. Altria valued the deal at $11.7 billion, including the assumption of about $1.3 billion in UST debt. After the deal closes, UST will be a wholly owned subsidiary of Altria.

Discussion: UST Inc. is the holding company for United States Smokeless Tobacco Company, the largest US manufacturer and distributor of snuff and chewing tobacco. The company offers dry tobacco under the Bruton, CC, Copenhagen, Skoal, Red Seal, and Husky brand names. UST also owns wine and spirit operations, including the Ste. Michelle winery, one of the ten largest wine producers in the United States.

Altria is the largest cigarette producing company in the United States and controls about half of the US tobacco market. The company was formerly known as Philip Morris and still operates subsidiary Philip Morris USA after having sold its international arm, Philip Morris International, in March 2008. The company produces cigarettes under a variety of brands including Marlboro, Parliament, Virginia Slims, and Basic.

While cigarette sales in the US have been declining for several years, sales of smokeless tobacco have risen about seven percent annually over the last four years. The acquisition strengthens Altria's position in the smokeless market.

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