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Big Tobacco remarriage could yet go up in smoke

If their subsequent share price drops are anything to go by, cigarette makers Altria Group Inc. and Philip Morris International Inc.'s potential merger has some way to go to convincing investors of its merits. Successfully completing this transaction, which at enterprise value of about $190 billion would be one of the largest consumer sector deals in history, will depend on balancing commercial logic with an appropriate deal structure.

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Source: Associated Press

This is no ordinary deal. Altria and Philip Morris were a single entity until the latter was spun off in 2008 to handle cigarette sales outside the U.S. A reunited company would have a broader diversity in terms of geography and product mix, notably through Altria's stakes in Juul Labs and Cronos Group, and Philip Morris' IQOS heated tobacco device.

Yet the regulatory environment is giving investors pause for thought. The 2008 demerger came at a time when cigarette companies were facing a barrage of legal challenges in the U.S. and was seen as a way of ring-fencing the international business. Reuniting the two companies just as regulators are ramping up the scrutiny once again, with Juul a particular target, could be a tough sell.

Striking a deal that gets the approval of Philip Morris shareholders will be another challenge. It has initially been described as a merger of equals, though the international business enjoys higher revenue and net profit, as well as lower net debt and a more favorable operating environment.

Mega-mergers are never straightforward, but bringing Altria and Philip Morris back together appears to be an uphill task.

Chart of the week: Protests continue to bite Hong Kong retail sales

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Automotive

August trade war escalation to hurt consumer, auto companies most

Rising tariffs on the largest batch of imports from China to date and tariffs on another $75 billion of U.S. exports means more bad news for industries already suffering as a result of the escalating trade war.

Uber, Lyft, DoorDash commit $90M on Calif. ballot to fight worker classification

The San Francisco-based companies are fighting a bill that would require higher standards for employers to classify workers as independent contractors instead of employees.

Retail

Hong Kong's retail sales take a beating from protests

Hong Kong's July retail sales fell 11.4% by value, showing for the first time the full impact of the anti-extradition bill demonstrations on the city's retailers.

Best Buy weighing price strategies ahead of new tariffs

The latest round of tariffs expected in September and December will target Best Buy's top products including televisions, smartwatches, headphones, computer, mobile phones and gaming consoles.

Dollar General shifts supply chain to trump tariff woes

The retailer has reduced its exposure to China and leveraged its presence in countries like Mexico and Vietnam, executives said.

Food, Beverage & Tobacco

Altria, Philip Morris reunion could strengthen smoke-free tobacco future

A combined company would be worth more than $195 billion and would rejoin Altria and Philip Morris more than 11 years after the two split.

Something's brewing with Coca-Cola in India

Coca-Cola is said to be pursuing the acquisition of a stake in Cafe Coffee Day, India's largest cafe chain, its latest step into the coffee market.

Soup growth returns at Campbell, but CEO points to work ahead

The company also said it expects adjusted EPS for its 2020 fiscal year to increase between 9% and 11%.

Brown-Forman on the rocks with splash of tariffs, Brexit

The maker of Jack Daniels cited tariffs and Brexit as factors in net sales declines in the U.K. and Germany

Consumer Edge is a weekly collection of critical developments across the automotive; retail; and food, beverage, and tobacco industries. Drawing on exclusive analysis and value-added content from the Consumer News team at S&P Global Market Intelligence, it is published every Thursday.