S&P Global Ratings said there is insufficient information available regarding a potential all-stock merger between of equals between Philip Morris International Inc.
and Altria Group Inc.
to warrant any rating actions on either company. However, the credit rating agency said it believes there will be “significant roadblocks” to completing a merger, including agreeing on a valuation that both companies accept. “Specifically, we believe there could be significant disagreement over the valuation of the companies’ next-generation products given the heightened regulatory scrutiny over some products (i.e. e-cigarettes) and the uncertain impact future regulatory actions could have, particularly in the U.S.,” S&P Global Ratings said. If there is more evidence in the coming months that a deal is likely, S&P said it would then assess the potential rating of the combined company. Currently, S&P rates Philip Morris credit at A and Altria credit at BBB, which is just two notches above junk. Altria’s stock dropped 3.2% in afternoon trading and Philip Morris shares shed 7.0%. Year to date, shares of Altria have lost 7.6% and Philip Morris have gained 8.4%, while the Dow Jones Industrial Average
has advanced 10.7%.
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