--Mexico one of Philip Morris's largest markets, according to
Citi
--Industry volume in Mexico has been hurt by price increases
--Deal expected to modestly add to future earnings
(Updates with additional background, analyst commentary and the
latest stock quote.)
By Saabira Chaudhuri and John Kell
Philip Morris International Inc. (PM) has agreed to buy Grupo
Carso SAB's (GPOVY, GCARSO.MX) 20% stake in its Mexico tobacco
business for about $700 million, giving the tobacco company
complete ownership of its Mexican unit.
Grupo Carso--a conglomerate founded by the one of the world's
richest men, Carlos Slim Helu--is selling its stake in Philip
Morris Mexico SA at a final price that is subject to a potential
adjustment based on Philip Morris Mexico's actual performance.
The deal is expected to close by the end of September and is
projected to marginally add to Philip Morris' earnings per share as
of the fourth quarter.
Mexico is an important market to Philip Morris, which sells
Marlboro, L&M and other cigarette brands in more than 180
markets. Citi analyst Vivien Azer estimates Mexico is the company's
tenth largest market, with the country representing 1% of industry
volume and 3% of Philip Morris's global volume.
Mexico is also one of Marlboro's strongest markets globally,
where the brand commands 53% of the market. But the industry's
cigarette volume there has been hurt by price increases enacted in
early 2012 and 2013.
Ms. Azer estimates the deal will marginally add to earnings this
year, but left the bank's estimates for 2013 unchanged. For 2014,
as a result of today's deal, Citi raised its full-year 2014
earnings estimate by two cents a share. Overall, analysts surveyed
by Thomson Reuters expect Philip Morris to report per-share
earnings of $6.26 in 2014.
Philip Morris shares were down 0.8% to $94.25 in recent trading.
The stock is up 13% in 2013, underperforming the broader market's
gain.
Write to Saabira Chaudhuri at saabira.chaudhuri@dowjones.com and
John Kell at john.kell@dowjones.com
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