Tobacco giant Altria Group (NYSE:MO) is best known for its Marlboro brand, and most people think of the company as the leader in cigarettes and smokeless tobacco in the U.S. market. Yet as many people have discovered over the past year, Altria also had a large stake in beer maker SABMiller, and when beer behemoth Anheuser-Busch InBev (NYSE:BUD) made an offer for SABMiller, Altria stood to gain more than nearly any other shareholders in the company. Now that Anheuser-Busch has completed the SABMiller merger, Altria investors just found out what the tobacco giant plans to do with the rewards it reaped from the deal. Let's take a closer look at what shareholders can expect from Altria in the near future.

Image source: Altria Group.

What Altria got

Atlria had a roughly 27% stake in SABMiller, and most shareholders in the beer maker elected to accept an all-cash offer for their SABMiller stock that paid them 45 British pounds per share. Such a deal would have given Altria a monster-sized pile of cash, but it also would have created a huge tax headache for the tobacco giant, as it would have had to pay capital gains tax on much of the cash it received in a deal. In order to accommodate Altria's need for a more tax-efficient transaction, Altria instead agreed to take the bulk of its consideration from the merger in the form of restricted stock of Anheuser-Busch, along with a relatively small cash component. Anheuser-Busch ended up offering a similar partial-share alternative deal involving restricted stock to any ordinary investors who wanted to take advantage of it.

Earlier this week, Altria revealed exactly what it received in the aftermath of the deal. When the merger closed, Altria received more than 185.1 million restricted shares of Anheuser-Busch, which works out to a 9.6% interest in the beer giant. In addition, Altria received $5.3 billion in cash. That was more than the $2.5 billion to $3 billion that most investors were expecting, but Altria explained that the cash resulted in part from the fact that more individual investors accepted the partial share alternative than had been initially expected. In addition, Altria said that it had successfully used currency derivatives to hedge its exposure to the British pound -- a move that was critical given the plunge in the U.K. currency following its decision to leave the European Union.

In addition to its economic interest, Altria will also get a hand in the management of Anheuser-Busch going forward. Specifically, Altria CEO Marty Barrington and CFO Billy Gifford have joined Anheuser-Busch's board of directors. That's useful, and not just as a way to make Altria's voice heard, but also to support the accounting practices that allow the tobacco giant to include a portion of Anheuser-Busch's profits on Altria's financial statements. However, because of differences in the timing of their respective calendars for financial reporting, Altria's earnings will reflect Anheuser-Busch's results with a one-quarter lag. That led to a $0.06 per share reduction in Altria's earnings guidance for the full 2016 year, but those lost earnings should show up in fiscal 2017 after the lag takes effect.

What Altria shareholders will get

Altria investors will see two primary impacts from the Anheuser-Busch takeover of SABMiller. First, the company will report a huge accounting gain in its fourth-quarter results, which Altria estimates will be about $13.7 billion. That will work out to $4.55 per share, effectively boosting the company's overall annual earnings by more than 150% and temporarily making its earnings multiple look artificially low.

Of more immediate interest to many Altria shareholders is what the company intends to do with its $5.3 billion cash windfall. Altria revealed its intentions for a portion of the cash, boosting its stock repurchase authorization from $1 billion to $3 billion. The company said it expects to spend the cash by mid-2018, although it retained the discretion on exactly when and whether repurchases get made.

Going forward, Altria left some key questions unanswered, most notably what it will do with the rest of the cash that most investors hadn't expected to materialize. Nevertheless, the tobacco giant is optimistic that its new position in Anheuser-Busch will allow it to reap even more rewards from the success of the global beer industry and continue to provide valuable diversification for investors who don't want all their eggs in the tobacco basket.

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