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Tobacco giant Altria Group to sell wine business for $1.2 billion

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July 9 (Reuters) - Altria Group Inc (MO.N) said on Friday it would sell its Ste. Michelle Wine Estates business to private equity firm Sycamore Partners for $1.2 billion, as the tobacco giant looks to focus its business on cigarette alternatives for smokers.

The Marlboro maker's shares rose 3% in morning trading after the company said it expects to use the cash proceeds from the sale for additional share buybacks.

With the popularity of cigarettes falling in the United States, especially among youngsters, Altria has been developing its line of dipping tobacco, nicotine pouches and other smokeless oral tobacco products.

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But its biggest bet on a cigarette alternative - a $12.8 billion investment in e-cigarette maker Juul Labs - has nosedived in value, following an increase in regulatory scrutiny of vaping products.

Ste. Michelle, which sells wine from estates in Washington State, Napa Valley and other parts of the United States, became part of Altria when the company bought smokeless tobacco company UST for $10.4 billion in 2008.

"We believe the transaction is an important step in Altria's value creation for shareholders and allows our management team greater focus on the pursuit of our Vision to responsibly transition adult smokers to a non-combustible future," Billy Gifford, Altria's Chief Executive Officer, said.

The sale, expected to close in the second half of 2021, is the second deal involving Big Tobacco announced on Friday.

Earlier in the day, Philip Morris International (PM.N) agreed to buy British drugmaker Vectura (VEC.L) for 1.05 billions pounds ($1.44 billion). read more

Sycamore specializes in retail investments, with stakes in regional department store operator Belk Inc, apparel brand Ann Taylor and web-based specialty retailer Hot Topic.

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Reporting by Uday Sampath in Bengaluru; Editing by Arun Koyyur

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