Altria Group Inc (MO)

[EZ2]

note the last paragraph.......really had not thought of that ----- hmmmmmmm !?!?!?!?!!

FT.com
Altria
Sunday February 25, 3:20 pm ET

Health risks aside, life has lately been good for bankers specialising in tobacco. The latest rumours of Altria (NYSE:MO) and Altadis joining forces to carve up rival cigarette maker Imperial Tobacco may have been more smoke than fire. Altria would probably prefer to get next month's spin-off of Kraft Foods (NYSE:KFT) out of the way first. There is still a risk, albeit small, of tobacco litigation causing a delay. Even so, Altria's days of abstinence from major dealmaking should soon end.
As the world's largest cigarette maker, Altria will have a massively undergeared balance sheet. It will probably boost share buy-backs and new debt issuance, generating a decent fee stream for banks in the process. The bigger opportunity, though, lies in Altria finally pulling its weight in consolidating the sector.

That would arguably be easier if it were to split itself up, yet again, between its domestic activities and the rest of the business. That would give Philip Morris International a more attractive acquisition currency by further removing it from remaining US litigation risks. Admittedly, these have receded anyway, while Altria itself could take on more debt. But a split should also alleviate antitrust issues, including those arising from Imperial's recently announced US acquisition.

In the meantime, Altria might well make a purchase in the US smokeless tobacco sector. But when it comes to international cigarette deals, there are two drawbacks to waiting too long. One is that European targets such as Altadis and Imperial might not be available forever. Meanwhile, Gallaher has already agreed to a takeover bid from Japan Tobacco. Second, there is a chance that Philip Morris USA might one day be interested in the same assets as Philip Morris International. That prospect is tantalising for bankers - but less so for Altria's current shareholders.