Major Mergers Under Way?

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Major Mergers Under Way?

NEW YORK -- Speculation that two of the largest convenience store suppliers -- Anheuser-Busch and Phillip Morris USA parent Altria -- could be engaging in talks to merge or purchase competing companies have reached a head in recent days. Published reports state InBev, the world's second largest beer producer by volume, could be in merger talks with U.S. brewer Anheuser Busch, while separate reports debate a possible purchase of smokeless tobacco company UST Inc. by Altria.

A report by Belgian business magazine Trends reported that InBev and Anheuser-Busch (A-B) are in talks that could lead to a merger of the two, according to a Reuters report citing the magazine.

InBev -- which holds brands such as Stella Artois, Beck's, Brahma and Leffe -- and A-B, maker of Budweiser and Bud Light, have been the subject of consistent merger speculation over the past year, the report stated.

Talks between the brewing giants have become more serious and a deal could be possible this year, Reuters reported, citing a report in the Wall Street Journal.

However, both brewers have repeatedly declined to comment, the report stated.

The Belgian magazine noted that InBev was not obliged to comment on rumors, but would have to comment to Belgian financial markets watchdog CBFA if there were concrete information, Reuters reported.

"If InBev is not communicating it must be concluded that there is no information that has a specific character," the magazine stated, according to the Reuters report.

Meanwhile, analysts cited by Dow Jones Newswires suggest rumors that Altria may buy U.S. smokeless tobacco manufacturer, UST Inc., are beyond its capabilities for the time being.

The most recent speculation was based on Altria's confirmation of plans to spin off its Philip Morris International unit, and announced stock buybacks, the report stated. Last week, Altria announced planned share repurchases of $ 7.5 billion and $13 billion, but specified it would keep cash on hand for any other "opportunities" that arise, which raised hopes Altria could decide to spend some of its cash on UST, the report stated.

While the rumors of the purchase have long been speculated, several factors make an immediate deal difficult.

The recent spinoff of Philip Morris International will likely keep the company occupied, and any potential deal with UST wouldn't be small -- the smokeless tobacco company's market capitalization is roughly $8.9 billion, Dow Jones Newswires reported.

"In the short term, Altria and Philip Morris USA are focused on the pending separation and efforts to improve operating performance and lower costs," Morgan Stanley analyst David Adelman said in a Feb. 3 research note to clients, cited by Dow Jones. "Why complicate that effort, increase its scale...through a self-induced acquisition?"

Adelman also noted Altria is testing its Marlboro Snus smokeless products. "Why incur the time, cost and expense of the effort, only to enter (the smokeless tobacco) category via an acquisition?" he asked.

In addition, Altria isn't in ongoing discussions with UST, reported Dow Jones Newswires, citing sources familiar with the matter.