This year marked the tenth anniversary of the separation between Altria (MO) and Philip Morris (PM). The de-merger of the Marlboro owner and its international branch was designed to insulate the growing international cigarette business from the extensive litigation suffered by its mature US parent company. Ten years on, it is becoming ever more clear that the separation was a strategic miscalculation. It's true that it has insulated Philip Morris International from US litigation, but it has also laid bare serious vulnerabilities at both Altria and Philip Morris. In this article, I will explain why a unified company would have been less vulnerable, and why it makes sense to re-merge Altria with Philip Morris.

In 2008, it was to be expected that Altria would be the smaller and slower growing of the two companies, while Philip Morris held promise for higher volume growth in the emerging markets of Eastern Europe, the Middle East, Africa, and Asia. The first years went more or less according to plan; Philip Morris booked steady volume gains and added the occasional acquisition, while Altria focused on squeezing as much value from the US business as possible, mostly through price increases on its cigarette products. Altria also diversified by buying the leading smokeless tobacco business in the United States, UST, in a deal announced in 2008.

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