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(Bloomberg) – Altria Group Inc. is selling a portion of its stake in Anheuser-Busch InBev SA for up to $2.2 billion to finance a stock buyback.
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Altria, which sells Marlboro cigarettes in the United States, owns about 10% of the beer maker. Altria announced Wednesday that it will sell AB InBev shares in a global stock offering in the United States, Europe, the United Kingdom and other countries outside the United States.
The tobacco group plans to offer AB InBev US shares at a price range of $60.75 to $62.75 per share, according to people familiar with the plans who asked not to be identified discussing confidential information.
AB InBev fell as much as 5.1% in extended trading in New York, and trading was halted in Brussels when markets opened. Altria stock was little changed at Wednesday’s close.
Analysts have long speculated that Altria would sell its stake in AB InBev, dating back to Anheuser-Busch’s acquisition of SABMiller in 2016.
“Over our decades of ownership, our beer investments have generated significant income and cash returns and supported our strong balance sheet,” said Billy Gifford, Altria CEO. Stated. He said the sale of about a fifth of AB InBev’s shares was an “opportunistic transaction” meant to generate a significant return on the investment.
repurchase action
Altria’s move comes after rival British American Tobacco announced it would sell up to $2.1 billion in stock in Indian partner ITC and use the proceeds to return cash to shareholders and invest in its business. It was done a day later. The makers of Lucky Strike cigarettes have already invested heavily in research and development of alternative nicotine products.
Read more: BAT begins buyback after selling ITC for up to $2.1 billion
Bloomberg Intelligence analyst Kenneth Shea said the fact that Altria sold some of its stake meant it could use some of the proceeds to develop its own products as competition for cigarette alternatives intensifies. He said it has been suggested that it could be used.
“It’s a huge amount of money for a stock buyback,” Mr. Shea said. “Reading between the lines, it means we need that cash to accelerate our diversification efforts into non-combustible products.”
Altria alternatives include NJOY vape products and On! oral nicotine pouches.
AB InBev announced it would buy back $200 million in stock directly from Altria once the offering is completed. Jefferies analyst Edward Mundy said Altria’s stake of about 2% of AB InBev’s existing stake could lead to short-term fluctuations in the stock price, but ABI’s participation would be a significant investment in capital allocation. It shows discipline in decision-making.
“Given the balance sheet repair and AB InBev’s cash flow growth, we do not rule out further share buybacks in the second half of the year and beyond,” he said.
–With assistance from Tiffany Cary.
(Added sharing information and comments. Previous version corrected the spelling of Marlboro in the first deckhead.)
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