Please ensure Javascript is enabled for purposes of website accessibility

Why Philip Morris Stock Just Popped 6.5%

By Rich Smith – Updated Sep 25, 2019 at 10:57AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Merger talks with Altria are dead, and PMI shareholders have avoided the Juul debacle.

What happened

Shares of Philip Morris International (PM 0.38%) are up a good 6.5% as of 11:11 a.m. EDT -- and its American analog Altria Group (MO 1.52%) is down half a percent -- on news that merger talks between the two companies, announced late last month, have been called off. In a press release this morning, PMI confirmed that merger discussions have ended.

So what

The companies didn't come right out and say why they have called off the merger, but they did hint at the reason: "After much deliberation, the companies have agreed to focus on launching IQOS in the U.S. as part of their mutual interest to achieve a smoke-free future." The statement then pointedly noted that "IQOS is not an e-vapor product."

And that suggests that the deciding factor in PMI's unwillingness to return to the Altria mothership is the brouhaha surrounding e-cigarettes in general, and Altria's $13 billion investment in e-cig maker Juul in particular.

Two people turning their backs on each other

Image source: Getty Images.

Now what

It's not like tobacco companies don't have enough bad press of their own to deal with, and apparently PMI decided that discretion was the better part of value here. No matter how good a deal Altria might put on the table, it wasn't worth the risk of tying itself to the press now surrounding e-cigs.

Chances are, this tobacco merger is now permanently DOA -- and Philip Morris investors like that news a lot.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Altria Group, Inc. Stock Quote
Altria Group, Inc.
MO
$41.41 (1.52%) $0.62
Philip Morris International Inc. Stock Quote
Philip Morris International Inc.
PM
$87.35 (0.38%) $0.33

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
327%
 
S&P 500 Returns
105%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.