• Richmond Times-Dispatch , Tuesday, September 9, 2008 11 AM

Altria Group, the parent company of Philip Morris USA and the nation's top cigarette maker, has agreed to pay $10.4 billion to acquire Stamford, Conn.-based UST, the top manufacturer of moist smokeless tobacco. "Altria is buying two tremendous brands in Skoal and Copenhagen, which it can drop quite profitably into its own distribution network," says Thomas Russo, of Gardner Russo & Gardner, which owns shares in both companies.

Cigarette consumption is declining at about 3 to 4% a year, says Michael E. Szymanczyk, Altria's chairman and CEO, but smokeless tobacco volume has been growing about 7% for two years. Szymanczyk says Altria's ongoing test marketing of two smokeless tobacco products under the Marlboro brand name will continue.

Altria is also gaining UST's Ste. Michelle Wine Estates unit, which it may sell.

Last year, Altria took its first major step outside of cigarettes, adding cigars to its portfolio by acquiring Pennsylvania-based John Middleton for $2.9 billion. Altria's largest competitor, Reynolds American, got into smokeless in 2006 by acquiring the second-largest U.S. manufacturer, Conwood LLC, which makes the Grizzly and Kodiak brands.

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