8-K: Altria Announces $2.4 Billion Share Repurchase Program and Raises 2024 Earnings Guidance Following Anheuser-Busch InBev Share Sale

Altria is significantly increasing its share repurchase program to $3.4 billion and raising its 2024 full-year earnings guidance after agreeing to sell 35 million shares of Anheuser-Busch InBev.

Summary

• Altria has agreed to sell 35 million shares of Anheuser-Busch InBev (ABI) through a global secondary offering at a price of $61.50 per ADS.
• ABI will also repurchase $200 million of its ordinary shares directly from Altria, concurrent with the offering.
• The total value of the offering and repurchase is approximately $2.4 billion.
• Altria has granted underwriters an option to purchase an additional 5.25 million ABI shares within 30 days.
• Altria is increasing its existing share repurchase program by $2.4 billion, bringing the total to $3.4 billion, which is expected to be completed by December 31, 2024.
• An estimated $2.4 billion accelerated share repurchase (ASR) program is expected as part of the expanded program.
• Altria expects to save cash from the elimination of future dividend payments on the repurchased shares.
• Altria's remaining ownership of ABI will be approximately 8.1% (or 7.8% if the underwriters' option is fully exercised).
• Altria estimates it will own approximately 159 million shares of ABI (or 154 million if the underwriters' option is fully exercised) after the transactions.
• Altria has agreed to a 180-day lockup period for its remaining ABI shares.
• Altria expects to maintain two seats on ABI's board until the 2025 annual general meeting, then one seat thereafter.
• Altria is raising its 2024 full-year adjusted diluted EPS guidance to a range of $5.05 to $5.17, representing a growth rate of 2% to 4.5% from a base of $4.95 in 2023.
• The 2024 adjusted diluted EPS growth is expected to be weighted to the second half of the year.
• The guidance includes the impact of two additional shipping days in 2024 and assumes limited impact from enforcement efforts in the illicit e-vapor market.
• The guidance excludes an estimated net income of approximately $0.2 billion (or $0.12 per share) from the partial sale of ABI in Q1 2024 and a $1.17 per share gain from the sale of IQOS rights in Q2 2024.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to the increased share repurchase program, raised earnings guidance, and strategic sale of ABI shares. The company is taking steps to enhance shareholder value and is confident in its future.

Positives

• The share repurchase program is significantly increased, indicating confidence in the company's future.
• The sale of ABI shares provides Altria with substantial capital.
• The company expects cash savings from the elimination of future dividend payments on repurchased shares.
• The 2024 full-year adjusted diluted EPS guidance has been raised, indicating positive financial performance.
• The company remains committed to its progressive dividend goal of mid-single digits dividend per share growth annually through 2028.
• The transactions are expected to be accretive to 2024 full-year adjusted diluted earnings per share.

Negatives

• Altria's ownership stake in ABI will be reduced to approximately 8.1% (or 7.8% if the underwriters' option is fully exercised).
• The company will have one less seat on the ABI board of directors after the 2025 annual general meeting.
• The company is subject to a 180-day lockup period for its remaining ABI shares.
• The external environment remains dynamic and subject to various factors such as the economy, consumer behavior, illicit e-vapor enforcement, and regulatory developments.

Risks

• The share repurchase program is subject to marketplace conditions and the discretion of the Board.
• The company's performance is subject to changes in adult tobacco consumer preferences and purchase behavior.
• The company faces competition from the e-vapor category and other innovative tobacco products.
• Macroeconomic and geopolitical conditions, including inflation, can impact consumer disposable income and purchasing behavior.
• The company is subject to litigation proceedings and governmental investigations.
• The company faces risks associated with federal, state, and local government actions, including FDA regulatory actions.
• The company is subject to risks related to climate change and other environmental sustainability matters.
• The company is subject to risks related to cyber-attacks and security breaches.
• The expected benefits of the investment in ABI may not materialize as expected.

Future Outlook

Altria expects the combined transactions to be accretive to its 2024 full-year adjusted diluted EPS and has raised its guidance accordingly. The company also remains committed to its progressive dividend goal through 2028. The company will continue to monitor external conditions and adjust as necessary.

Management Comments

• These opportunistic capital allocation decisions reflect our ongoing confidence in Altrias future and the significant value offered in our shares today, said Billy Gifford, Altrias Chief Executive Officer.
• We have a longstanding history of returning cash to our shareholders, and todays announcement reflects our continued desire to create long-term shareholder value.

Industry Context

This announcement reflects a strategic move by Altria to monetize a portion of its investment in ABI while enhancing shareholder returns through a significant share repurchase program. This is in line with the trend of companies focusing on core operations and returning capital to shareholders. The tobacco industry is facing challenges from declining cigarette sales and increased regulatory scrutiny, making strategic capital allocation and shareholder returns crucial.

Comparison to Industry Standards

• The share repurchase program is substantial compared to other companies in the consumer staples sector, indicating a strong commitment to returning capital to shareholders.
• The sale of a portion of its stake in ABI is a strategic move to unlock value, similar to other companies divesting non-core assets.
• The raised EPS guidance is a positive signal, but the tobacco industry faces headwinds from declining cigarette sales and regulatory pressures, which are common across the sector.
• Altria's commitment to a progressive dividend policy is consistent with the practices of other mature, cash-generating companies in the consumer staples sector, such as Philip Morris International and British American Tobacco.

Related Party Transactions

• The sale of ABI shares to the public and the repurchase of shares by ABI are related party transactions.

Stakeholder Impact

• Shareholders will benefit from the increased share repurchase program and potential for higher earnings per share.
• Employees may benefit from the company's improved financial position and future growth prospects.
• Customers may not be directly impacted by this announcement.
• Suppliers and creditors may see increased stability in the company's financial position.

Next Steps

• Complete the sale of 35 million ABI shares.
• Complete the $200 million share repurchase by ABI.
• Execute the expanded $3.4 billion share repurchase program, including the $2.4 billion ASR program.
• Monitor marketplace conditions and other factors related to the share repurchase program.
• Monitor the external environment and adjust guidance as necessary.
• Continue to use the equity method of accounting for the investment in ABI.

Key Dates

Keywords

share repurchase, Anheuser-Busch InBev, ABI, earnings guidance, EPS, share sale, accelerated share repurchase, dividend, tobacco, investment