25 September 2019 by jbchevrel
Altria Group (MO) is one of the world's largest producers and marketers of tobacco, cigarettes and other related products. Today the risk on the name under performed in US IG space, on the news that Philip Morris International (PMI) had stopped the talks on potential $200B merger (which would have reunited MO with PMI, which it spun off in 08). In a context of regulatory crackdown on e-cigarettes in the US (indeed -- the Trump administration is moving to tighten regulation on e-vapour products because of the link to lethal lung illnesses), Philip Morris International has just decided to stop the talks mainly due to MO’s stake in vaping company Juul Labs, it will instead focus on the US launch of Iqos (heated tobacco product, not e-vapour, and importantly, already authorised by US FDA). MO had indeed bot a 35% ($12.8B) stake in this vaping company Juul Labs back in Dec18. Today the 5y (dec24) MO CDS widened by +10bp in US morning, before reverting to +5bp in our European close. In cash space, 3.8% Feb24s are wider +11bp on the day, so no big move in the slightly negative basis. Despite today’s development, some sell-side analysts including WFC argue that the talks could resume later.