Altria seen selling UST Inc wine business: analysts

NEW YORK (Reuters) - Altria Group Inc (MO.N: Quote, Profile, Research, Stock Buzz) is likely to sell smokeless tobacco maker UST Inc's (UST.N: Quote, Profile, Research, Stock Buzz) wine business once it closes a deal to acquire the company, analysts said on Monday.

The maker of Marlboro cigarettes said it would buy UST, the nation's largest maker of smokeless tobacco, for $10.4 billion as a way to gain access to a growing market as domestic cigarette sales steadily decline.

But Altria, which had U.S. tobacco sales of $15 billion last year excluding excise taxes, has little reason to keep UST's wine business, Ste. Michelle Wine Estates.

While Ste. Michelle provided much smaller UST with some diversity in its business, "in a big organization like Altria, I don't see it making much sense," said Standard & Poor's alcohol and tobacco analyst Esther Kwon.

"I would expect that they'd put it up for sale once the deal closes," she added.

Altria could fetch as much as $800 million from the unit, which had 2007 sales of $354 million, said Morningstar analyst Ann Gilpin.

Constellation Brands Inc (STZ.N: Quote, Profile, Research, Stock Buzz), which recently acquired Fortune Brands Inc's (FO.N: Quote, Profile, Research, Stock Buzz) wine business for $885 million, is the most obvious bidder, Gilpin said, since it has moved to consolidate the industry.

Fortune, Brown-Forman Corp (BFb.N: Quote, Profile, Research, Stock Buzz) and Diageo PLC (DGE.L: Quote, Profile, Research, Stock Buzz) seem unlikely to be suitors since they are focused on other types of alcoholic drinks like spirits or beer.

Gilpin noted that Japan's Kirin Holdings Co Ltd (2503.T: Quote, Profile, Research, Stock Buzz) was currently under pressure to make acquisitions as a way to diversify, but said she did not know if it would be interested in the U.S. wine business.

Ste. Michelle vineyards span more than 4,200 acres in Washington and California, with such labels as Columbia Crest, Stimson Estate Cellars and Domaine Ste. Michelle.

Once it owns UST, Altria plans to "take a look at the wine business and make a determination as to what's the best way to create value for shareholders relative to that," Chief Executive Michael Szymanczyk said on Monday during a conference call with analysts.

He gave no further details.

A spokeswoman for Diageo, the world's largest alcoholic drinks group, said the company considers any acquisition that becomes available but could not comment on whether Diageo was looking at Ste. Michelle specifically.

Spokesmen for Constellation and Brown-Forman declined to comment. Kirin could not immediately be reached.

France-based Pernod Ricard SA (PERP.PA: Quote, Profile, Research, Stock Buzz), the world's second-largest alcoholic drinks company, was not immediately available to comment. A trade paper quoted its chairman, Patrick Ricard, as saying last year that it would be nice if the company owned a California wine, but that the company was going to invest first in vodka.

Pernod has since acquired Absolut vodka maker Vin & Sprit.