Investors responded well, sending shares of Philip Morris nearly 7.3% higher to $76.80 in morning trade. Altria stock also nearly climbed 2% to $41.42.
The companies, which said in late August that they were discussing a potential all-stock merger, now say they will focus on jointly launching IQOS, a tobacco vaporizer, in the United States. As of right now, it is the only product of its kind with pre-market authorization from the US Food and Drug Administration (FDA).
A merger would have reunited the two tobacco operations after they split in 2008.
"While we believed the creation of a new merged company had the potential to create incremental revenue and cost synergies, we could not reach agreement," Altria CEO Howard Willard said in a statement.
"We look forward to continuing our commercialization of IQOS in the US under our existing arrangement," he added.
In a statement, Philip Morris CEO Andre Calantzopoulos echoed the same sentiments: “After much deliberation, the companies have agreed to focus on launching IQOS in the U.S. as part of their mutual interest to achieve a smoke-free future.”
Altria recently invested nearly $13 billion for a 35% stake in dominant global e-cigarette company Juul last year and has invested in cannabis company Cronos.
An outbreak of a mysterious lung disease has hit the vaping industry and has taken a bite out of Altria’s stock. The company has seen roughly $30 billion in market value erased since April when the FDA launched a new investigation into vaping.
Juul to replace CEO
In a separate announcement Wednesday, Juul which has been facing a public backlash, said former Altria executive KC Crosthwaite will replace Kevin Burns as chief executive officer. As Altria’s chief growth officer, Crosthwaite oversaw the company’s expansion into heated tobacco products.
Juul said Crosthwaite will continue “a broad review” of the company’s practices and policies to ensure alignment with its aim of responsible leadership.
More specifically, the company said it will suspend all broadcast, print and digital product advertising in the US. It also said it will not lobby the Trump administration on its impending policy to remove flavored e-cigarettes from the market. Federal survey data in 2018 showed teen vaping had snowballed into an “epidemic.”
Contact Uttara Choudhury at [email protected]
Follow her on Twitter: @UttaraProactive