Philip Morris International and Altria have confirmed they are in talks to reunite.
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.
PMI's shares lost nearly 8% on Tuesday, closing at $71.70 a share, while Altria's fell about 4%, closing at $45.25 a share. PMI's shares were pressured Monday amid merger speculation. Altria's stock initially rose Tuesday morning when the talks were confirmed, but later gave up those gains after it was reported that shareholders wouldn't receive a premium. At the same time, PMI shares recouped some of their losses.
Before the announcement, PMI's market value stood at around $121 billion while Altria's outstanding stock was valued at roughly $88 billion. Wells Fargo analyst Bonnie Herzog in a note to clients Tuesday said she was "excited" about the discussions and she has "long believed a combination of the two companies would make a lot of sense."
PMI in a press release cautioned that it's possible the talks do not result in a deal. Any move would need to be approved by the companies' respective boards, shareholders and regulators, as well as meet "other conditions."At the time Altria and PMI split, cigarette sales were increasing overseas while they were falling in the U.S. International sales have been declining since 2012.
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