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Altria Jumps on Plan to Sell Ste. Michelle Wine Estates for $1.2B

PE firm Sycamore Partners is paying $1.2 billion cash for Altria's Ste. Michelle Wine Estates business.
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Shares of Altria Group   (MO)  jumped on Friday after the tobacco company agreed to sell its Ste. Michelle Wine Estates business to private equity firm Sycamore Partners for $1.2 billion cash. 

Ste. Michelle, Woodinville, Wash., produces premium wines sold under labels including Chateau Ste. Michelle, 14 Hands and Stag's Leap Wine Cellars. It also imports Antinori and Champagne Nicolas Feuillatte products into the U.S.

The companies hope to close the deal by year's end, subject to Sycamore obtaining the necessary financing and antitrust regulators clearing the purchase. 

The deal generates value for holders and enables management to focus more on its effort to "responsibly transition adult smokers to a non-combustible future," Altria Chief Executive Billy Gifford said in a statement.

Altria plans to use the proceeds from the sale to buy back stock.

At last check shares of the Richmond, Va., company were 2.8% higher at $47.75. 

Sycamore Partners is the New York private-equity firm focused on consumer investments.

In late April, shares of tobacco stocks fell Thursday after the U.S. Food and Drug Administration said it would propose a ban on the sale of menthol cigarettes. Altria produces Marlboro Menthol.

Altria Chief Executive Billy Gifford, quoted by Bloomberg from the company's earnings-report conference call, said, “We don’t think prohibition works.” The company has said banning flavors would prompt smokers to switch to regular cigarettes or black-market ones, the news service reported.

The FDA said it is “working toward issuing proposed product standards within the next year to ban menthol” as a flavor in cigarettes and to ban all flavors, including menthol, in cigars.

The aim is to "significantly reduce disease and death" from using these two products.