With all that’s going on with the coronavirus pandemic, investors might have missed this one piece of interesting news. On Wednesday, the Federal Trade Commission (FTC) announced that it would be suing one of the largest tobacco companies in the country, Altria (NYSE: MO), for an earlier acquisition.
The agency is accusing the company of making a merger that violated federal antitrust laws, forming a giant in the cigarette and tobacco market that stifles competition.
The FTC officially filed an administrative complaint against the company on Wednesday, with an initial trial scheduled to begin in early January 2021. While that’s still a long way away, if the legal proceedings don’t go in Altria’s favor, the company could up being forced to split apart from Juul, the company it acquired a stake in back in 2018.
“Altria and Juul turned from competitors to collaborators by eliminating competition and sharing in Juul’s profits,” said the head of the FTC’s Bureau of Competition, Ian Commer. “We believe that our investment in Juul does not harm competition and that the FTC misunderstood the facts. We are disappointed with the FTC’s decision, believe we have a strong defense and will vigorously defend our investment,” added Altria’s legal team in an official response.
Altria is currently the largest U.S. tobacco company in terms of annual sales, and while the industry has been on a decline over the past couple of decades, the company has done very well for itself. In particular, Altria has always had a history of rewarding shareholders with stock buybacks as well as a significant dividend. While owning a vice stock might not be appealing to everybody, Altria had always been considered by many investors a very promising dividend stock.
However, Altria’s Juul deal has been more trouble than its been worth. The company ended up having to suspend a number of its different products, particularly those involved in flavored vaping products. With the number of vaping-related deaths in the U.S. has skyrocketed, Jull, and Altria by extension, ended up catching much of this attention.
More recently in January, Altria ended up taking a second major writedown for its Juul acquisition, now valuing the company at $12 billion. This is a substantial decrease from the $38 billion valuation Juul had back in December.
Shares of Altria ended the day down 4% in light of the news. Ever since the beginning of January, when its second Juul-related writedown was announced, the company’s stock price has been on a steady decline. Despite this, most Wall Street analysts are split in regards to Altria, with an almost equal number being optimistic about the company as well as neutral.
Altria Company Profile
Altria comprises Philip Morris USA, U.S. Smokeless Tobacco, John Middleton, Ste. Michelle Wine Estates, Nu Mark, and Philip Morris Capital. It holds a 10.2% interest in the world’s largest brewer, Anheuser-Busch InBev. Through its tobacco subsidiaries, Altria holds the leading position in cigarettes and smokeless tobacco in the United States and the number-two spot in machine-made cigars. The company’s Marlboro brand is the leading cigarette brand in the U.S. with a 40% share. – Warrior Trading News
