Altria completes purchase of UST

The top cigarette company in the nation is also its top seller of smokeless tobacco.

Henrico County-based Altria Group Inc., the parent company of cigarette maker Philip Morris USA, said yesterday that it completed its $10.4 billion acquisition of UST Inc., maker of the top-selling premium moist snuff brands Skoal and Copenhagen.

The acquisition, which includes the assumption of $1.3 billion in debt, gives Altria a leading position in the growing smokeless-tobacco category and a platform for potential growth as cigarette consumption declines in the United States.

Altria has said the smokeless category, worth $3.7 billion in the U.S. in 2007, has grown 6 percent or 7 percent in the past two years.

UST's operating units -- its smokeless-tobacco business and its premium-wine subsidiary, Ste. Michelle Wine Estates Ltd.-- are subsidiaries of Altria, which is planning to cut about $250 million in expenses by combining administrative functions.

The integration plan includes closing UST's Stamford, Conn., headquarters by the end of this year and moving the management operations to Altria's headquarters annex on West Broad Street, company spokesman David Sylvia said.

The company is still determining how many of UST's approximately 350 headquarters employees will be offered jobs in the Richmond area, Sylvia said. Employees who are not transferred will be given severance packages starting at six months' pay and benefits.

Shareholders of UST common stock are entitled to receive $69.50 per share in cash for each share of common stock held as of yesterday, when common stock stopped trading on the New York Stock Exchange.

Altria's largest competitor, Reynolds American Inc. of Winston-Salem, N.C., acquired the second-largest U.S. smokeless tobacco maker, Conwood LLC, in 2006. That deal was valued at $3.5 billion.

In addition to Philip Morris USA and UST, Altria owns cigar maker John Middleton Inc. and a 29 percent stake in brewer SABMiller PLC.

UST operates manufacturing plants in Nashville, Tenn.; Franklin Park, Ill.; and Hopkinsville, Ky.

"Those facilities will continue to manufacture smokeless tobacco products, and as of right now, there are no plans for them to be affected," Sylvia said.
Contact John Reid Blackwell at (804) 775-8123 or .