Philip Morris and Altria confirm merger talks

"There can be no assurance that any agreement or transaction will result from these discussions," they each said in a statement. Any deal would be subject to the approval of both companies’ boards and shareholders, and regulators.

The companies both said that they intend to make no further comment regarding the discussions unless and until it is appropriate to do so.

At 1435 BST, Altria shares were up 8.7% at $51.18 and Philip Morris shares were down 7.2% at $72.10.

In a note released before the merger talks were confirmed, RBC Capital Markets said that given the changing global consumption/regulatory landscape, it would make strategic sense for the Marlboro, IQQS and JUUL brands to have a unified global strategy run by one company.

News of a potential deal comes more than a decade after the two companies split.

RBC said: "To say the tobacco landscape has changed since 2008 would be an understatement. Simply put, when the split occurred, the rationale was focused on separating a faster-growing, global tobacco story with less rigid regulatory/litigation headwinds from a declining, highly competitive US market with increasing regulatory/litigation uncertainty.

"While the breakup has been a shareholder success (PM/MO up 260%/360% including dividends), the last two years have created significant uncertainty and the future of tobacco is a lot more dynamic than it was in 2008 (both stocks underperformed the S&P by nearly -35%)."

As far as the strategic rationale for getting back together is concerned, RBC pointed to geographic alignment with international competitors, noting that both British American Tobacco and Imperial Brands have exposure to the US.

It also said that buying Altria would provide Philip Morris the steady cash flows of PM USA and ABI dividends, which it could use to consistently return cash to its shareholders.