Henrico County-based tobacco giant Altria Group Inc. has ended merger talks with Philip Morris International Inc., the company it spun off in 2008.
The two companies had announced in late August they were discussing a potential all-stock, merger of equals.
“While we believed the creation of a new merged company had the potential to create incremental revenue and cost synergies, we could not reach agreement,” said Howard Willard, Altria’s chairman and chief executive officer.
Instead of a merger, Willard said that the companies will focus on launching iQOS, an alternative to conventional cigarettes, in the U.S.
The “heat not burn” device was developed by Philip Morris International. Altria was expected to start a test market in Atlanta of iQOS.
“We look forward to continuing our commercialization of IQOS in the U.S. under our existing arrangement,” Willard said.
The iQOS device is sold in 40 countries. It was approved for sale in the U.S. by the FDA in April.
A merger would have created a combined company with a market capitalization of more than $200 billion and a dominant role in the global tobacco industry.
Altria is the Fortune 500 parent company of top U.S. cigarette maker Philip Morris USA. It operates the only Philip Morris USA cigarette plant in South Richmond.
Philip Morris International, which sells Marlboro and other cigarette brands outside the U.S., was spun off from Altria as a separate public company 11 years ago. Based in Switzerland, it had a 28% market share of the international cigarette market in 2018, excluding China.
The breakup gave Philip Morris International more leeway to pursue sales growth in emerging markets. Since the split, Philip Morris International has churned out new Marlboro-branded products catering to local tastes in Asia, Europe, Latin America and other regions, even as both companies invest in alternatives to traditional cigarettes.