Jump to full article: DealBook (New York Times blog), 2006-04-26
Intro: An analyst at Prudential Equity Group wrote Tuesday that Reynolds “paid through the nose for this business,†and Breakingviews followed up by calling the 14-times-operating-profit multiple a “big price†for a hedge against slowing cigarette sales.
It would be easy to think that this all bodes well for the No. 1 smokeless tobacco maker, UST. With a market capitalization of nearly $7.3 billion, the company had already been pegged as a potential takeover candidate, even before the Conwood deal was announced. And Altria Group, the parent of Reynolds rival Philip Morris USA , wants to expand into other tobacco-related businesses. (Altria is widely assumed to have been a competing bidder in the Conwood auction.)
But many analysts on Tuesday tried to snuff out speculation of an impending UST takeover.
Judy Hong of Goldman Sachs wrote in a research note on Monday that “we believe this news could be negative for UST for a few reasons.â€
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