Tobacco giant Altria (MO) is planning to raise $2.5bn in cash and has announced the sale of a large percentage of the stake that the company holds in the brewing company Anheuser-Busch InBev (BUD).
Altria to raise $2.4bn by selling BUD shares
Altria is going to sell 35 million shares of BUD in a public offering at a price of $61.50 per share. It also plans to sell $200m of the stock straight back to Anheuser-Busch. This would give the firm a total of $2.4bn. An option of Anheuser-Busch purchasing an extra 5.25 million shares worth $323m has also been written into the agreement.
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Despite this, Altria will still hold the majority of its stake in BUD, which is currently 8.1% and worth around $10bn. Long known as a company that pays high dividends, Altria will use much of this new cash boost to give money back to its shareholders in the form of buybacks. This will be done by extending the existing share repurchase programme from $1bn to $2.4bn, with the intention of buying back shares of that value by the end of 2024.
Billy Gifford, the CEO of Altria, said:
We have a long-standing history of returning cash to our shareholders, and today’s announcement reflects our continued desire to create long-term shareholder value.
Analysts are divided over whether this is a good decision or not. While diversifying by selling the underperforming BUD shares appears to make sense, it could also be a sign that Altria is struggling to meet its commitment to provide high dividends through to 2028.
