By Lisa Kerner
Charlotte, N.C., Sept. 8 - Altria Group, Inc. will acquire all outstanding shares of UST Inc. for $69.50 each under the terms of a definitive merger agreement announced on Monday.
The transaction is valued at approximately $11.7 billion, including the assumption of approximately $1.3 billion of debt, according to Altria and UST.
In a letter to Altria employees, chairman and chief executive officer Michael E. Szymanczyk said combining Altria and UST will "create the premier tobacco company in the United States with leading brands in cigarettes, smokeless tobacco and machine-made large cigars."
Altria will use existing credit and cash, plus new committed bridge financing totaling $7.0 billion from Goldman Sachs and JPMorgan, to fund the acquisition.
In addition, Altria said it plans to access the public-debt market to refinance a portion of its credit facilities.
Philip Morris USA Inc., a wholly owned subsidiary of Altria, issued guarantees for Altria's debt to boost its credit ratings for the refinancings.
The merger agreement provides termination rights for both companies. UST would pay a termination fee of $250 million and Altria would pay a $200 million reverse termination fee in specified circumstances, it was reported in a form 8-K filed with the Securities and Exchange Commission.
Annual synergies as a result of the merger could reach approximately $250 million by 2011, the companies said.
UST chairman and chief executive officer Murray S. Kessler will lead the integration and join Altria as vice chair.
In connection with the acquisition and to facilitate financing, Altria modified its share repurchase program to a three-year $4.0 billion program from a two-year $7.5 billion program. The New York tobacco products company said it expects to resume purchasing stock against the modified program in 2009.
Goldman Sachs, Centerview Partners and JPMorgan acted as financial advisers to Altria. UST was advised by Citigroup.
UST is a holding company for U.S. Smokeless Tobacco Co., a producer and marketer of moist smokeless tobacco products including Copenhagen, Skoal, Red Seal and Husky. The company is located in Richmond, Va.
| Acquirer: | Altria Group, Inc.
|
| Target: | UST Inc.
|
| Announcement date: | Sept. 8
|
| Transaction total: | $11.7 billion
|
| Price per share: | $69.50
|
| Termination fees: | $200 million for Altria, $250 million for UST
|
| Expected closing: | Upon approvals
|
| Stock price for target: | NYSE: UST: $67.55 on Sept. 5
|
© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere.
For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.
