Altria to pay $10.3 billion for maker of Skoal

The Wall Street Journal reports (subscription required) that Altria Group Inc. (NYSE: MO) has agreed to acquire UST Inc. (NYSE: UST) for $10.3 billion in cash. According to the Journal, "The deal would give Altria a strong foothold in smokeless tobacco, a growing area of the market where it has had difficulty making inroads against long-established brands."

The deal diversifies Phillip Morris away from cigarettes -- a business that's declining by 3% or 4% -- and into the smokeless tobacco business that's increasing in the 6-7% range.

What is interesting about this deal is that it also acquires more of the potentially-disastrous legal liabilities that come with selling and aggressively marketing a product that causes people to die a slow and painful death -- Altria is apparently betting that the legal liabilities are already priced into UST stock. If they're right about that, it bodes well for the tobacco industry as a whole.

UST owns the Skoal, Copenhagen, Red Seal, and Husky smokeless tobacco brands, and also has interests in alcohol through its Ste. Michelle Wine Estates business.