Altria Group agreed to buy cigar maker John Middleton for US$ 2.9 billion in cash to counter falling cigarette sales in the US.

The net cost of the acquisition of John Middleton, maker of Black & Mild cigars, from privately held Bradford Holdings is US$ 2.2 billion after deducting US$ 700 million in tax benefits arising from the deal, Altria said.
The deal is expected to close by the end of the year and add modestly to Altria's 2008 earnings, the company said.
John Middleton's sells large machine-made cigars and its operating revenue is projected to be US$ 360 million in 2007, generating operating income of US$ 182 million. From 2003 to 2007, the company’s operating revenue has grown at 10 per cent annually, while operating income is up at a 13 per cent rate, Altria said.
Volumes of machine-made large cigars, which account for approximately half of the total US cigar market of 10.5 billion cigars, have grown approximately 4 per cent per annum since 2003. Altria plans to boost the cigar unit's sales with its distribution network that delivers one of every two cigarettes sold in the US.
The transaction is the biggest acquisition in the 105-year history of Altria's Philip Morris USA division. John Middleton, founded 151 years ago, will continue to operate out of Limerick, Pennsylvania. (pi)