Altria announced early Thursday it has entered into an agreement to acquire 100% of John Middleton, Inc., a leading maker of machine-made large cigars, in a $2.9B all cash deal. John Middleton is currently owned by privately held Bradford Holdings. In a statement, Altria said the net cost of the acquisition after deducting tax benefits is $2.2B. Philip Morris USA CEO Michael E. Szymanczyk commented, "The acquisition is both strategically compelling and financially attractive. It fits squarely with our announced strategy to grow our U.S. tobacco business beyond cigarettes and complements our recent initiatives in the smokeless category." John Middleton is expected to have operating revenues of $360M in 2007 with operating earnings of $182M. Both revenues and earnings have grown 10% and 13%, respectively, on a compound annual basis since 2003. The transaction is expected to be completed by the end of the year and "modestly accretive" to earnings in 2008 and "generate an attractive double-digit economic return." Shares of Altria rose 0.2% to $72.93 and were last unchanged in pre-market trading.
Commentary: Altria Shareholders: Watch Exxon's Supreme Court Appeal • Reynolds' Healthy Growth In Smokeless Tobacco Will Also Benefit Altria • Altria Higher on Q3 Beat and Raise
Stocks to watch: MO. Competitors: RAI, BTI, ITY. ETFs: DIA, IYK, XLP, VDC