Altria / UST........hmmmmm

The deal between Altria (MO) and UST (UST) will make Altria the clear leader in both smokeless and traditional tobacco. It also must be an admission that their offering will enter the "non premium" space below the Copnehagen and Skole offerings from UST.

The deal, rumored to be worth more than $10 billion could be announced as early as Monday, though the timing could be sooner given media reports of the negotiations. UST shares are up 24 percent in trading from a close of $54 on Thursday. As expected, Altria spokesman David Sylvia declined to comment on speculation about a deal. A UST spokesman could not be reached for comment.
Given the long term future of smoking, Altria moving into this market is a must. Even if Altria is forced to raise their price to $70 a share, that would only represent a 16% premium to UST's January high, not expensive by any means given the brands in UST control.
It would also ad about $1 billion a year in earnings (rough number not accounting for synergies) to the $4 billion Altria already produces.
The larger point here would be gaining access to UST sales and distribution channels for its own smokeless offering. Rather than develop these, a UST purchase simply allows those folks to begin offering and pushing Altria's smokeless products through their channels. That, is a very valuable asset for Altria.
It also means Altria, in one swoop now becomes the player in the smokeless market, whereas now they are sitting on the sidelines.
If you are going to buy into a markets, go for the top of it.