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Altria
The shares of the group have had a difficult year and the recent announcement of the White House of a possible project to ban e cigarette flavors is only the latest concern of the giant of the tobacco – and perhaps a good reason to speed up discussions with
Philip Morris International
,
the opinions Cowen & Co.
The story back. Altria (MO) is down 9.5% until the close on Wednesday, a period when the
S & P 500
is up about 19%. The company faced poor results, lower cigarette sales and investor skepticism about its investment in vaping startups Juul Labs, Pocket product on!, And the cannabis company Cronos Group (CRON), especially since it has experienced difficulties. Last month's news, that he was in talks to merge with Philip Morris (PM), was greeted with mixed feelings on the street and by investors.
What's up. Of course, regulation is a constant concern for big tobacco, but as an analyst of Cowen & Co. Vivien Azer In writing, the new announcement that the Food & Drug Administration will attack flavorings with steam could be the real boost for the recombination of Altria and Philip Morris.
The idea of regulating flavoring is not new and, although this may not be the case everywhere in the United States, at least, calls have mushroomed as a result of recent problems with high-profile health which, according to some medical experts, could be related to e-cigarettes. . Azer writes that Wednesday's decision regarding a possible ban "could be the missing link," explains the dialogue between Altria and Philip Morris, which left him puzzled, as well as others. She notes that
British American Tobacco
(BTI) acquired the remaining stake in Reynolds that she did not own in the same week in 2017, when the FDA unveiled a surprise roadmap to reduce nicotine levels.
Look to the front. Azer reiterated Market Perform's ratings on Altria and Philip Morris, pointing out that much uncertainty remained, though she adds that extreme regulation over e-cigarettes could at least mitigate some lingering concerns Philip Morris International Operations).
However, this may not be enough to convince investors. Arguments in favor of the merger are clear for Altria: its stake in Juul is under increasing scrutiny, the latter as the largest vaping company in the US, has felt the pressure of recent negative headings regarding the dangers of electronic cigarettes, The Philip Morris iQOS heat-protector has worked well in other markets. There may be a precedent for tobacco consolidation in the face of tougher government regulation, but that will probably not do much for Philip Morris investors to change their belief that a merger of equals is unbalanced.
Write to Teresa Rivas at [email protected]
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