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Retailers, consumers and prices

Check Out Line: Marlboro maker investing in smokeless tobacco

September 8, 2008

cigarette.jpgCheck Out Altria Group’s $10.4 billion offer to buy UST Inc.

While rumors of the deal were reported last week, Altria, the maker of Marlboro cigarettes, issued its official offer on Monday to buy UST, the largest U.S. smokeless tobacco maker, for $69.50 a share in cash plus $1.3 billion in debt on Monday.  

Buying UST, which also owns Ste. Michelle Wine Estates, would be a quick way for Altria to reach into the growing smokeless tobacco market, as it seeks ways to diversify from the declining U.S. cigarette market.

But things aren’t that simple. While UST dominates the U.S. smokeless tobacco market, its main brands Skoal and Copenhagen are losing market share as people trade down to cheaper brands amid surging gas prices and a weak U.S. economy.

Price cuts is one way out for UST, according to some analysts, but others question if Altria will be able to do that.

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(Photo: Reuters)

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