From: SMOKEFREE@compuserve.com
Date: Mon, 09/08/08
It will be interesting to see if Altria will begin informing smokers that
smokefree tobacco products are far less hazardous alternatives to
cigaretttes.
Bill Godshall
- - -
http://www.altria.com/investors/02_00_NewsDetail.asp?reqid=1194435
News Releases
Altria Group, Inc. Agrees to Acquire UST Inc., World's Leading Moist
Smokeless Tobacco Manufacturer, for $69.50 per Share in Cash
-- Creates a total tobacco platform with superior premium tobacco
brands that includes Marlboro, Copenhagen, Skoal and Black &
Mild
-- Accretive to adjusted diluted earnings per share within twelve
months of closing
-- Generates estimated annual synergies of $250 million by 2011
-- Diversifies Altria's revenues and operating income
RICHMOND, Va.--(BUSINESS WIRE)--Sept. 8, 2008--Regulatory News:
Altria Group, Inc. (Altria) (NYSE: MO) and UST Inc. (UST) (NYSE: UST) today
announced that they have entered into a definitive agreement for Altria to
acquire all outstanding shares of UST, the world's leading moist smokeless
tobacco (MST) manufacturer. Under the terms of the agreement, shareholders
of UST will receive $69.50 in cash for each share of common stock held. The
transaction is valued at approximately $11.7 billion, which includes the
assumption of approximately $1.3 billion of debt.
"The combination of Altria and UST creates the premier tobacco company in
the United States with leading brands in cigarettes, smokeless tobacco and
machine-made large cigars," said Michael E. Szymanczyk, Chairman and Chief
Executive Officer of Altria. "We are excited about this strategic and
financially attractive acquisition as it will enhance our ability to
deliver superior shareholder return that is expected to exceed our 12%
goal. This transaction is consistent with our growth strategy of making
disciplined investments in adjacent categories. UST provides Altria with
the leading premium brands, Copenhagen and Skoal, in the highly profitable
MST category. We will also acquire Ste. Michelle Wine Estates, a premium
wine business, as part of the transaction."
Upon completion of the transaction, Altria's operating companies will offer
adult tobacco consumers a diverse range of superior premium tobacco
products with strong brands including Marlboro, Copenhagen, Skoal and Black
& Mild.
"This all cash transaction delivers compelling value to UST's
shareholders," said Murray S. Kessler, Chairman and Chief Executive Officer
of UST. "UST's growth strategy will clearly be enhanced by Altria's
resources and infrastructure."
Based on UST's three-month average stock price of $53.90, this offer
represents a premium of 28.9% to UST's shareholders.
The transaction is subject to UST shareholder approval and customary
regulatory approvals, which will be pursued promptly. A copy of the
agreement containing all the terms of the transaction is filed today with
the U.S. Securities and Exchange Commission.
The transaction does not change Altria's 2008 guidance for adjusted
full-year diluted earnings per share from continuing operations, which is
expected to be in the range of $1.63 to $1.67. This range represents a 9%
to 11% growth rate from an adjusted base of $1.50 per share in 2007.
Financial Benefits
Altria expects the acquisition of UST to be accretive to adjusted diluted
earnings per share within twelve months of closing and to generate an
attractive double-digit economic return.
The integration is anticipated to generate approximately $250 million in
annual synergies by 2011, primarily driven by reduced selling, general and
administrative and corporate expenses. Altria believes that these estimated
synergies will enable the company to deliver increased shareholder and
consumer value.
The UST acquisition is expected to grow and diversify Altria's operating
income and net revenues. For the first half of 2008, reported operating
income for Altria and UST was $2.6 billion and $451 million, respectively..
If Altria had owned UST since the beginning of 2008, Altria's first half of
2008 net revenues would have increased 10.3% to $10.4 billion as shown in
Table 1 below.
Table 1 ($ Billions) First-Half 2008: Net Revenues Comparison
----------------------------------------------------------------------
Excluding UST Including UST
----------------------------------------------------------------------
Net % Net %
Revenues Contribution Revenues Contribution
-----------------------------------------------
PM USA $9.15 96.7% $9.15 87.6%
John Middleton Co. $0.19 2.0% $0.19 1.8%
PMCC $0.12 1.3% $0.12 1.2%
UST - - $0.98 9.4%
--------- ------------- --------- -------------
Total $9.46 100% $10.44 100%
----------------------------------------------------------------------
Altria generates approximately $3.5 billion of operating cash flow per
year. After the acquisition Altria expects to generate over $4.0 billion of
operating cash flow per year. Altria continues to be committed to returning
a large majority of this cash to Altria shareholders through a combination
of dividends and share repurchases. Altria anticipates maintaining a
dividend payout ratio of approximately 75% post-transaction. Payments of
future dividends will be at the discretion of the Altria Board of
Directors.
In conjunction with the acquisition agreement, Altria has modified its
share repurchase program. The Board of Directors has approved a three-year
(2008 to 2010) $4.0 billion program, replacing a previously announced
two-year $7.5 billion program. This modified program facilitates financing
the UST acquisition. Altria spent approximately $1.2 billion repurchasing
53.5 million shares of its stock in 2008, and the company expects to resume
purchasing stock against this modified program in 2009.
Financing
Altria has received new committed bridge financing totaling $7.0 billion
from Goldman Sachs & Co. and J. P. Morgan which, together with its existing
credit facilities and cash, is expected to be more than sufficient to fund
the transaction. Altria intends to access the public-debt market to
refinance a portion of its credit facilities. To help Altria achieve the
highest credit ratings on such refinancings, Philip Morris USA Inc., a
wholly-owned subsidiary of Altria, has issued guarantees for Altria's debt.
Management
Under the terms of the agreement, UST will become a wholly-owned subsidiary
of Altria. Following the completion of the transaction, Murray S. Kessler
will be named Vice Chair of Altria, reporting directly to Michael E.
Szymanczyk, and will oversee the integration. "I look forward to working
closely with Mike and his management team to integrate our outstanding
brands and employees into the Altria organization," said Mr. Kessler.
"We are pleased that Murray has agreed to stay on board during the
integration period to help complete the transition," said Mr. Szymanczyk.
"U.S. Smokeless Tobacco Company is the leading and most profitable moist
smokeless producer and marketer due to the efforts of Murray, his
management team and employees. They have a deep understanding of the
growing smokeless tobacco category. It is my pleasure to welcome UST's
talented employees to the Altria family of companies."
Advisors
Goldman Sachs & Co., Centerview Partners and J. P. Morgan acted as
financial advisors to Altria. Hunton & Williams LLP acted as corporate
counsel, Arnold & Porter LLP acted as regulatory counsel and Sutherland
Asbill & Brennan LLP acted as tax counsel.
Citigroup acted as lead financial advisor and Skadden, Arps, Slate, Meagher
& Flom LLP acted as lead legal counsel to UST. Perella Weinberg Partners LP
acted as lead financial advisor and Sullivan & Cromwell LLP acted as lead
legal counsel to UST's Board of Directors.
Conference Call Webcast
A conference call hosted by Mr. Szymanczyk and Mr. Kessler with members of
the investment community and news media will be webcast at 9:00 a.m.
Eastern Time on Monday, September 8, 2008. Access to the webcast is
available at www.altria.com and www.ustinc.com. An archived copy of the
webcast will be available on Altria's and UST's websites until October 7,
2008.
Altria Group, Inc. Profile
As of September 8, 2008, Altria owned 100% of each of Philip Morris USA
Inc. (PM USA), John Middleton Co. (Middleton) and Philip Morris Capital
Corporation. In addition, Altria held a 28.5% economic and voting interest
in SABMiller plc.
The brand portfolio of Altria's tobacco operating companies includes such
well-known names as Marlboro, Parliament, Virginia Slims, Basic and Black &
Mild. Trademarks and service marks related to Altria referenced in this
release are the property of, or licensed by, Altria or its subsidiaries.
More information is available about Altria at www.altria.com.
UST Inc. Profile
UST Inc. is a holding company for its principal subsidiaries: U.S.
Smokeless Tobacco Company and Ste. Michelle Wine Estates. U.S. Smokeless
Tobacco Company is the leading producer and marketer of moist smokeless
tobacco products including Copenhagen, Skoal, Red Seal and Husky. Ste.
Michelle Wine Estates produces and markets premium wines sold nationally
under 20 different labels including Chateau Ste. Michelle, Columbia Crest,
Stag's Leap Wine Cellars and Erath, as well as exclusively distributes and
markets Antinori products in the United States. Trademarks and service
marks related to UST referenced in this release are the property of, or
licensed by, UST or its subsidiaries. More information is available about
UST at www.ustinc.com.
Forward-Looking and Cautionary Statements
This press release contains projections of future results and other
forward-looking statements that involve a number of risks and uncertainties
and are made pursuant to the Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995.
The forward-looking statements in this press release include, without
limitation, expectations with respect to the proposed acquisition of UST.
Important factors that may cause actual results and outcomes to differ
materially from those contained in such forward-looking statements include,
without limitation, the parties' ability to consummate the transaction as
expected; the possibility that one or more of the conditions to the
consummation of the transaction may not be satisfied; the possibility that
regulatory and/or shareholder approvals required for the transaction may
not be obtained in a timely manner, if at all; the parties' ability to meet
expectations regarding the timing, completion, and other matters relating
to the transaction; and any event that could give rise to the termination
of the merger agreement. Other important factors include the possibility
that the expected synergies will not be realized or will not be realized
within the expected time period and the risk that the integration of UST
will not be successful, in each case due to, among other things, changes in
the tobacco industry; prevailing economic, market, and business conditions
affecting the parties; risks that the transaction disrupts the parties'
current plans and operations; and the other factors detailed in the
parties' publicly filed documents, including their respective Annual
Reports on Form 10-K for the year ended December 31, 2007 and their
respective Quarterly Reports on Form 10-Q for the period ended June 30,
2008.
Other factors as well could cause actual results and outcomes to differ
materially from those contained in the projections and forward-looking
statements included in this press release. By way of example, Altria's
tobacco subsidiaries (PM USA and Middleton) as well as UST's subsidiaries
are subject to intense price competition; changes in consumer preferences
and demand for their products; fluctuations in raw material availability,
quality and cost; fluctuations in levels of customer inventories; the
effects of global, national and local economic and market conditions;
changes to income tax laws; legislation, including actual and potential
excise tax increases; increasing marketing and regulatory restrictions; the
effects of price increases related to excise tax increases and concluded
tobacco litigation settlements on consumption rates and consumer
preferences within price segments; health concerns relating to the use of
tobacco products and exposure to environmental tobacco smoke; governmental
regulation; privately imposed smoking restrictions; and governmental and
grand jury investigations. Their results are dependent upon their continued
ability to promote brand equity successfully; to anticipate and respond to
new consumer trends; to develop new products and markets and to broaden
brand portfolios in order to compete effectively; and to improve
productivity.
Altria's and UST's subsidiaries continue to be subject to litigation,
including risks associated with adverse jury and judicial determinations,
courts reaching conclusions at variance with the companies' understanding
of applicable law and bonding requirements in the limited number of
jurisdictions that do not limit the dollar amount of appeal bonds.
Altria and UST caution that the foregoing list of important factors is not
complete and do not undertake to update any forward-looking statements that
it may make. All subsequent written and oral forward-looking statements
concerning the proposed transaction or other matters and attributable to
Altria or UST or any person acting on their behalf are expressly qualified
in their entirety by the cautionary statements referenced above.
Other Information
In connection with the proposed acquisition, UST intends to file relevant
materials with the SEC, including a proxy statement on Schedule 14A.
INVESTORS AND SHAREHOLDERS ARE URGED TO READ UST'S PROXY STATEMENT AND ALL
RELEVANT DOCUMENTS FILED WITH THE SEC (WHEN THEY BECOME AVAILABLE) BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.
Investors and shareholders will be able to obtain the documents free of
charge through the website maintained by the SEC at www.sec.gov. A free
copy of the proxy statement and other relevant documents, when they become
available, also may be obtained from UST Inc., 6 High Ridge Park, Building
A, Stamford, Connecticut 06905-1323, Attn: Investor Relations. Investors
and security holders may access copies of the documents filed with the U.S.
Securities and Exchange Commission by UST on its website at www.ustinc.com.
Such documents are not currently available.
Altria and UST and their respective directors and executive officers may be
deemed to be participants in the solicitation of proxies from UST's
shareholders in connection with the merger. Information about Altria's
directors and executive officers is set forth in Altria's proxy statement
on Schedule 14A filed with the SEC on April 24, 2008 and Altria's Annual
Report on Form 10-K filed on February 28, 2008. Information about UST's
directors and executive officers is set forth in UST's proxy statement on
Schedule 14A filed with the SEC on March 24, 2008 and UST's Annual Report
on Form 10-K filed on February 22, 2008. Additional information regarding
the interests of participants in the solicitation of proxies in connection
with the merger will be included in the proxy statement that UST intends to
file with the SEC.
Source: Altria Group, Inc.; UST Inc.
CONTACT: Clifford B. Fleet
Altria Client Services, Investor Relations
804-484-8222
Daniel R. Murphy
Altria Client Services, Investor Relations
804-484-8222
Brendan J. McCormick
Altria Client Services, Media Affairs
804-484-8897
Mark A. Rozelle
UST, Investor Relations
203-817-3520
Thomas J. Fitzgerald
UST, Media Relations
203-817-3549
SOURCE: Altria Group, Inc. and UST Inc.
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