Altria Group, Inc. (Altria) (NYSE:MO) today announced that it is
commencing a cash tender offer for up to $2,000,000,000 aggregate
principal amount (the “Tender Cap”) of its senior unsecured notes
identified in the table below (the “Notes”). Concurrently, Altria is
commencing an underwritten public offering of new senior unsecured notes
(the “New Notes”). Altria expects these transactions to reduce the
weighted average coupon rate and future interest expense and extend the
weighted average maturity of its consolidated debt.
The terms and conditions of the tender offer are described in the Offer
to Purchase, dated October 28, 2013, and the related Letter of
Transmittal. The following table sets forth the Notes subject to the
tender offer and certain information relating to pricing for the tender
offer.
Title of Securities
|
|
CUSIP Number
|
|
Outstanding Principal Amount
|
|
Acceptance Priority Level
|
|
Aggregate Maximum Purchase Sublimit*
|
|
Early Tender Payment**
|
|
U.S. Treasury Reference Security
|
|
Fixed Spread (bps)
|
|
Bloomberg Reference Page
|
9.950% Notes due 2038
|
|
02209SAE3
|
|
$
|
1,500,000,000
|
|
|
|
|
|
$30
|
|
2.875% due 05/15/2043
|
|
198
|
|
FIT1
|
|
|
|
|
|
|
1
|
|
$
|
1,500,000,000
|
|
|
|
|
|
|
|
|
10.200% Notes due 2039
|
|
02209SAH6
|
|
$
|
1,500,000,000
|
|
|
|
|
|
$30
|
|
2.875% due 05/15/2043
|
|
198
|
|
FIT1
|
9.700% Notes due 2018
|
|
02209SAD5
|
|
$
|
1,949,308,000
|
|
|
|
|
|
$30
|
|
1.375% due 09/30/2018
|
|
95
|
|
FIT1
|
|
|
|
|
|
|
2
|
|
Not Applicable
|
|
|
|
|
|
|
|
|
9.250% Notes due 2019
|
|
02209SAJ2
|
|
$
|
1,350,692,000
|
|
|
|
|
|
$30
|
|
1.375% due 09/30/2018
|
|
135
|
|
FIT1
|
* Applies to the aggregate principal amount of Notes with Acceptance
Priority Level 1.
** Per $1,000 principal amount of Notes validly
tendered and not validly withdrawn at or prior to the Early Tender
Deadline and accepted for purchase.
The amount of each series of Notes that may be accepted for purchase
will be determined in accordance with the Acceptance Priority Levels set
forth in the table above and may be prorated as described in the Offer
to Purchase. All Notes validly tendered and not validly withdrawn of a
series with Acceptance Priority Level 1 up to the purchase sublimit of
$1,500,000,000 set forth in the table above (the “Aggregate Maximum
Purchase Sublimit”) will be accepted for purchase before any Notes of a
series with Acceptance Priority Level 2 are accepted for purchase. Upon
the terms and subject to the conditions of the tender offer, if the
aggregate principal amount of all Notes with Acceptance Priority Level 1
validly tendered and not validly withdrawn exceeds the Aggregate Maximum
Purchase Sublimit, such Notes will be accepted for purchase on a
prorated basis as described in the Offer to Purchase, such that the
aggregate principal amount of the Notes with Acceptance Priority Level 1
accepted in the tender offer equals the Aggregate Maximum Purchase
Sublimit.
Upon the terms and subject to the conditions of the tender offer, Altria
will accept for purchase Notes validly tendered and not validly
withdrawn with Acceptance Priority Level 2 in an aggregate principal
amount up to the Tender Cap remaining available for application to
Acceptance Priority Level 2 Notes following the purchase of Acceptance
Level Priority 1 Notes, provided that in no event will the aggregate
principal amount of Acceptance Priority Level 1 Notes and Acceptance
Priority Level 2 Notes purchased exceed the Tender Cap. If the aggregate
principal amount of such Acceptance Priority Level 2 Notes validly
tendered and not validly withdrawn exceeds the Tender Cap remaining
available for application to Acceptance Priority Level 2 Notes following
the purchase of Acceptance Level Priority 1 Notes, Altria will accept
such Notes for purchase on a prorated basis as described in the Offer to
Purchase, in an aggregate principal amount equal to the Tender Cap
remaining available for application to Acceptance Priority Level 2 Notes
following the purchase of Acceptance Level Priority 1 Notes. Subject to
applicable law, Altria has the right to increase or decrease the Tender
Cap and/or the Aggregate Maximum Purchase Sublimit at its discretion.
Altria may increase or decrease the Tender Cap and/or the Aggregate
Maximum Purchase Sublimit after the Withdrawal Deadline (as defined
below) without extending the withdrawal rights.
The tender offer for the Notes will expire at 12:00 midnight, New York
City time, on Monday, November 25, 2013, unless extended or earlier
terminated (the “Expiration Date”) by Altria. Holders who wish to be
eligible to receive the Total Consideration (as defined below), which
includes an Early Tender Payment specified in the table above, must
validly tender and not validly withdraw their Notes at any time at or
prior to 5:00 p.m., New York City time, on Friday, November 8, 2013,
unless extended or earlier terminated (the “Early Tender Deadline”) by
Altria. Holders tendering their Notes after the Early Tender Deadline
and at or prior to the Expiration Date will be eligible to receive only
the tender offer consideration, namely the Total Consideration less the
Early Tender Payment specified in the table above. Tendered Notes may be
withdrawn at any time at or prior to 5:00 p.m., New York City time, on
Friday, November 8, 2013, unless extended by Altria (as may be extended,
the “Withdrawal Deadline”), but may not be withdrawn after the
Withdrawal Deadline.
For Notes validly tendered and not validly withdrawn at or prior to the
Early Tender Deadline and accepted for purchase, the applicable total
consideration per $1,000 principal amount of each series of Notes (for
each series, the “Total Consideration”) will be a price determined as
described in the Offer to Purchase intended to result in a yield to
maturity (calculated in accordance with standard market practice) equal
to the sum of (i) the yield to maturity for the applicable United States
Treasury (“UST”) Reference Security specified in the table above,
calculated based on the bid-side price of such UST Reference Security as
of 11:00 a.m., New York City time, on Tuesday, November 12, 2013 (being
the first business day following the Early Tender Deadline), plus (ii)
the applicable Fixed Spread specified in the table above. The Total
Consideration includes the Early Tender Payment specified in the table
above.
In addition, holders whose Notes are purchased in the tender offer will
be paid accrued and unpaid interest on their purchased Notes from the
applicable last interest payment date up to, but not including, the
payment date for such purchased Notes.
The tender offer is subject to the satisfaction or waiver of certain
conditions, as specified in the Offer to Purchase, including the
issuance of the New Notes prior to the Expiration Date on terms and
conditions satisfactory to Altria.
Note Issuance
Altria is also commencing an underwritten public offering of New Notes
under its effective shelf registration statement on Form S-3 that was
previously filed by Altria with the Securities and Exchange Commission
(the “SEC”). Altria expects to use the net proceeds from the issuance of
the New Notes to fund the purchase of the Notes accepted in the tender
offer and for general corporate purposes.
Information Relating to the Tender Offer
Goldman, Sachs & Co., RBS Securities Inc. and Deutsche Bank Securities,
Inc. are acting as the lead dealer managers for the tender offer.
Investors with questions may contact Goldman, Sachs & Co. at (800)
828-3182 (toll-free) or (212) 902-6595 (collect) and RBS Securities Inc.
at (877) 297-9832 (toll-free) or (203) 897-6145. Global Bondholder
Services Corporation is the Information Agent and Depositary and can be
contacted at the following numbers: banks and brokers can call (212)
430-3774 (collect), and all others can call (866) 470-4200 (toll-free).
This press release is neither an offer to sell nor a solicitation of
offers to buy any securities. The tender offer is being made only
pursuant to the Offer to Purchase and the related Letter of Transmittal.
The tender offer is not being made to holders of Notes in any
jurisdiction in which the making or acceptance thereof would not be in
compliance with the securities, blue sky or other laws of such
jurisdiction. None of Altria, the Dealer Managers, the Depositary, the
Information Agent or the trustee for the Notes makes any recommendation
in connection with the tender offer. Please refer to the Offer to
Purchase for a description of offer terms, conditions, disclaimers and
other information applicable to the tender offer. The offering of the
New Notes is being made only by means of a prospectus and related
prospectus supplement, copies of which may be obtained, when available,
by visiting the SEC’s website at www.sec.gov
or by contacting Goldman, Sachs & Co. by mail at Prospectus Department,
200 West Street, New York, NY, 10282, by telephone at (866) 471-2526, by
facsimile at (212) 902-9316, or by email at prospectus-ny@ny.email.gs.com
or by contacting RBS Securities Inc. by mail at 600 Washington
Boulevard, Stamford, CT 06901, Attention: Syndicate, or by telephone at
(866) 844-2071.
2013 Full-Year EPS Guidance
Altria expects to record a one-time pre-tax charge of approximately $1.1
billion, or $0.35 per share, against reported earnings in the fourth
quarter of 2013, reflecting the estimated loss on early extinguishment
of debt related to the tender offer (the “Estimated Charge”). The
Estimated Charge assumes current market pricing and that $2.0 billion in
Notes are tendered. The final pre-tax charge will vary to the extent
that the pricing and amount of Notes tendered differ from Altria’s
original assumptions.
Altria revises its guidance for 2013 full-year reported diluted EPS from
a range of $2.57 to $2.62 to a range of $2.22 to $2.27, reflecting the
Estimated Charge and the other special items detailed in Table 1 below.
Altria reaffirms its guidance for 2013 full-year adjusted diluted EPS,
which excludes the special items shown in Table 1 below, to be in the
range of $2.36 to $2.41, representing a growth rate of 7% to 9% from an
adjusted diluted EPS base of $2.21 per share in 2012. Altria’s
reaffirmation of the 2013 full-year adjusted diluted EPS guidance
includes an increase in Altria’s 2013 full-year effective tax rate on
operations that Altria expects to result from the tender offer, as
discussed below.
The factors described in the Forward-Looking and Cautionary Statements
section of this release represent continuing risks to this forecast.
Reconciliations of full-year adjusted to reported diluted EPS are shown
in Table 1 below.
Table 1 - Altria’s Full-Year Earnings Per Share Guidance
Excluding Special Items
|
|
|
|
|
Full Year
|
|
|
2013 Guidance
|
|
2012
|
|
Change
|
Reported diluted EPS
|
|
$
|
2.22
|
to
|
$
|
2.27
|
|
$
|
2.06
|
|
8
|
%
|
to
|
10
|
%
|
NPM Adjustment items 1
|
|
|
|
|
(0.21
|
)
|
|
-
|
|
|
|
|
Asset impairment, exit and implementation costs
|
|
|
|
|
-
|
|
|
0.01
|
|
|
|
|
SABMiller special items
|
|
|
|
|
0.01
|
|
|
(0.08
|
)
|
|
|
|
PMCC leveraged lease benefit
|
|
|
|
|
-
|
|
|
(0.03
|
)
|
|
|
|
Loss on early extinguishment of debt
|
|
|
|
|
0.35
|
|
|
0.28
|
|
|
|
|
Tax items 2
|
|
|
|
|
(0.01
|
)
|
|
(0.03
|
)
|
|
|
|
Adjusted diluted EPS
|
|
$
|
2.36
|
to
|
$
|
2.41
|
|
$
|
2.21
|
|
7
|
%
|
to
|
9
|
%
|
1Reflects the impact of Philip Morris USA
Inc.’s (PM USA) settlement with certain states of the
non-participating manufacturer adjustment (NPM Adjustment) disputes
for 2003-2012 (NPM Adjustment Settlement) ($0.16) and the diligent
enforcement rulings of the arbitration panel presiding over the NPM
Adjustment dispute for 2003 (NPM Arbitration Panel Decision) ($0.05).
|
2Excludes the tax impact of the Philip Morris
Capital Corporation (PMCC) leveraged lease benefit.
|
2013 Full-Year Tax Rate Guidance
Altria anticipates that its 2013 full-year effective tax rate on
operations will increase by half of one percent to approximately 36.2%
due to a reduction in certain consolidated tax benefits resulting from
the tender offer. The factors described in the Forward-Looking and
Cautionary Statements section of this release represent continuing risks
to this forecast. Reconciliations of 2013 full-year effective tax rate
on operations to reported effective tax rate are shown in Table 2 below.
Table 2 - Altria’s 2013 Tax Rates
|
|
|
|
|
Full Year
|
|
|
2013 Guidance
|
Reported effective tax rate
|
|
35.6
|
%
|
Tax benefit from Mondelēz International, Inc. tax matters
|
|
0.2
|
%
|
Other tax benefits primarily due to the reversal of tax accruals no
longer required
|
|
|
|
0.4
|
%
|
Effective tax rate on operations
|
|
36.2
|
%
|
Dividend and Share Repurchase Program
Altria does not expect the tender for the Notes or the issuance of the
New Notes to impact Altria’s dividend payout ratio target of
approximately 80% of its adjusted diluted EPS or its current $1.0
billion share repurchase program. Future dividend payments and the share
repurchase program remain subject to the discretion of Altria’s Board of
Directors.
Altria’s Profile
Altria directly or indirectly owns 100% of each of PM USA, U.S.
Smokeless Tobacco Company LLC (USSTC), John Middleton Co. (Middleton),
Nu Mark LLC (Nu Mark), Ste. Michelle Wine Estates Ltd. (Ste. Michelle)
and PMCC. Altria holds a continuing economic and voting interest in
SABMiller plc (SABMiller).
The brand portfolios of Altria’s tobacco operating companies include Marlboro®,
Black & Mild®, Copenhagen®, Skoal® and MarkTen™.
Ste. Michelle produces and markets premium wines sold under various
labels, including Chateau Ste. Michelle®, Columbia Crest®, 14
Hands® and Stag’s Leap Wine Cellars®, and it imports and
markets Antinori®, Champagne Nicolas Feuillatte™ and Villa
Maria Estate™ products in the United States. Trademarks and service
marks related to Altria referenced in this release are the property of
Altria or its subsidiaries or are used with permission. More information
about Altria is available at altria.com.
Forward-Looking and Cautionary Statements
This press release contains projections of future results and other
forward-looking statements that involve a number of risks and
uncertainties and are made pursuant to the Safe Harbor Provisions of the
Private Securities Litigation Reform Act of 1995.
Important factors that may cause actual results and outcomes to differ
materially from those contained in the projections and forward-looking
statements included in this press release are described in Altria’s
publicly filed reports, including its Annual Report on Form 10-K for the
year ended December 31, 2012 and its Quarterly Report on Form 10-Q for
the period ended September 30, 2013.
These factors include the following: Altria’s tobacco businesses (PM
USA, USSTC, Middleton and Nu Mark) being subject to significant
competition; changes in adult tobacco consumer preferences and demand
for their products; fluctuations in raw material availability, quality
and price; reliance on key facilities and suppliers; reliance on
critical information systems, many of which are managed by third-party
service providers; fluctuations in levels of customer inventories; the
effects of global, national and local economic and market conditions;
changes to income tax laws; federal, state and local legislative
activity, including actual and potential federal and state excise tax
increases; increasing marketing and regulatory restrictions; the effects
of price increases related to excise tax increases and concluded tobacco
litigation settlements on trade inventories, consumption rates and
consumer preferences within price segments; health concerns relating to
the use of tobacco products and exposure to environmental tobacco smoke;
privately imposed smoking restrictions; and, from time to time,
governmental investigations.
Furthermore, the results of Altria’s tobacco businesses are dependent
upon their continued ability to promote brand equity successfully; to
anticipate and respond to evolving adult consumer preferences; to
develop, manufacture, market and distribute products that appeal to
adult tobacco consumers (including, where appropriate, through
arrangements with third parties); to improve productivity; and to
protect or enhance margins through cost savings and price increases.
Altria and its tobacco businesses are also subject to federal, state and
local government regulation, including broad-based regulation of PM USA
and USSTC by the U.S. Food and Drug Administration. Altria and its
subsidiaries continue to be subject to litigation, including risks
associated with adverse jury and judicial determinations, courts
reaching conclusions at variance with the companies’ understanding of
applicable law, bonding requirements in the limited number of
jurisdictions that do not limit the dollar amount of appeal bonds and
certain challenges to bond cap statutes.
Altria cautions that the foregoing list of important factors is not
complete and does not undertake to update any forward-looking statements
that it may make except as required by applicable law. All subsequent
written and oral forward-looking statements attributable to Altria or
any person acting on its behalf are expressly qualified in their
entirety by the cautionary statements referenced above.
Copyright Business Wire 2013