[ad_1]
An agreement would create a giant of the electronic cigarette and vaping. Philip Morris is the maker of iQOS electronic cigarettes, which heat tobacco and still contain nicotine. Altria has already made an agreement with Philip Morris for the sale of iQOS devices in the United States.
But the FDA's proposed plan, released Wednesday by Health and Social Services Secretary Alex Azar, to temporarily ban non-smoking electronic cigarettes, such as mint and menthol, could make the merger more difficult to swallow .
The Centers for Disease Control and Prevention Wednesday issued a very strong statement in favor of the e-cigarette crackdown.
"This is an important step in the fight against the e-cigarette consumption epidemic among our country's young people, and will help protect them against any nicotine addiction and risk." associated with it, "said CDC Director Robert Redfield. "Cleansing the tobacco-free products market is important for reversing this alarming epidemic."
"We must do everything in our power to reduce the use of e-cigarettes among high school and college students," said Redfield.
Tobacco stores in smoke?
Investors are worried about these new regulatory hurdles.
Owen Bennett, an analyst at Jefferies, narrowed his price targets for Altria and Philip Morris on Thursday, citing concerns over the FDA's decision to look closely at the use of Juul, particularly among teens .
"There is growing public turmoil around Juul and a willingness by the regulators to take action.They were subject to a negative title after a negative title over the years. Last 18 months, "said Bennett in a report.
Cowen's Vivien Azer said in a report Thursday that concerns over a wider crackdown should prompt investors to question whether the reunification of Philip Morris-Altria will take place.
Although Philip Morris does not plan to pay the big price for Altria, an agreement may not be viable, Azer noted.
"Why would Philip Morris even want to enter into a no-premium deal, while they're buying an asset with a fundamental trouble perspective?" she says.
An Altria spokesperson told CNN Business that "we believe urgent action is needed and we look forward to reviewing the guidelines. Reducing the use of e-vapor products by young people is a top priority for Altria. " The company did not explain what the FDA guidelines meant for a possible Philip Morris merger. Philip Morris was not immediately available for comment.
Concerns about Juul's weakness outdated?
But an analyst is not too worried that the possibility of stricter rules on juvenile vaping will kill an Altria-Philip Morris deal.
Bonnie Herzog of Wells Fargo Securities said in a report that raising the minimum age of buying electronic cigarettes to 21 would be a smart idea that the tobacco industry would probably support.
Herzog also noted that Juul had already agreed to remove many flavored products from stores last November.
And you must think that Altria still wants a merger. Its shares are down more than 10% this year while Philip Morris shares are up 12% in 2019.
Nevertheless, Christopher Growe, a Stifel analyst, says that even if the repression against Juul were to continue, Altria could take advantage of the fact that people could eventually return to traditional tobacco cigarettes.
In other words, Altria is perhaps not the worst thing in the world to finally reduce its ambitions of vaping.
The participation of Alttia in Juul "has been considered a boon or an albatross at any time of the last nine months.We estimate that its value must be lower due to increasing pressure, both legal and regulatory", said Growe in a report.
"We believe that headlines, if any, are positive for Altria – further regulation of e-cigarettes would likely favor higher cigarette performance for the company, exceeding any loss in value from its stake in the company. Juul, "concluded Growe.
[ad_2]
Source link