Philip Morris and Altria in Talks

Philip Morris International is in discussions with Altria about a possible all-stock, merger of equals, the tobacco giants announced Tuesday. The companies did not disclose the stake each would expect to hold in a newly combined company, but people familiar with the talks told CNBC that PMI and Altria are weighing a 59%-41% split, respectively.

The deal would result in a divided board and management, the people said, requesting anonymity because they are not authorized to speak publicly. The current deal being discussed does not envision a premium for shareholders of either company. Talks intensified this summer, and a deal could be announced within weeks, the people said.

A deal, if one is reached, would reunite Philip Morris International and Altria more than a decade after the two companies split. Altria spun off PMI in 2008 and has remained a largely U.S.-focused company, selling Marlboro cigarettes domestically while PMI has focused on selling cigarettes overseas.

The move would also allow Philip Morris to profit from Juul, rather than compete with it. Philip Morris’s marquee product in the e-cigarette market is IQOS, a penlike device that warms a tobacco stick and releases a vapor with the taste of tobacco, but has fewer harmful chemicals than cigarette smoke does. It is available in more than 47 countries, but was only recently approved for sale in the United States. The product will be marketed in the United States through a licensing agreement with Altria.

The Food and Drug Administration’s two-year review of IQOS delayed its introduction and gave Juul time to capture the market. E-cigarette makers were given a delay in applying for F.D.A. approval, but Philip Morris submitted countless studies and testimony to clear tough regulatory hurdles. It is still waiting for the F.D.A.’s decision on whether IQOS can be sold as a reduced-risk product, which means they can be marketed as safer than traditional cigarettes.

Shares in both companies fell on Wall Street as investors questioned the deal. Altria’s stock closed down 4 percent, and Philip Morris dropped 7.8 percent.

Keep those stops tight
Todd “Bubba” Horwitz