The seller is privately held Bradford Holdings of suburban Philadelphia, headed by John S. Middleton, whom friends describe as an intensely competitive, private businessman. His holdings include the McIntosh Inn hotels and a minority share in the Phillies.
Middleton inherited the Phillies' stake from his father, Herbert H. Middleton Jr.
Middleton would like to own a bigger share of the Phillies and make the team more competitive, according to people who know him. He has been frugal with the team's budget for salaries, but has been willing to raise it to get a star, such as Jim Thome in 2002, according to people close to the team.
In 1924, his late grandfather, Herbert H. Middleton Sr., a tobacco connoisseur, started working at the family's Center City shop. In 1950, he expanded the company into manufacturing, with operations on Third Street in Philadelphia. In 1968, the company introduced the first cigar made with pipe tobacco.
In contrast, John Middleton, who is now selling the company, has never been that fond of the tobacco business, two friends said. He was a successful wrestler at the Haverford School, and remains athletic in his early 50s. He likes to ski and stay fit, the friends said.
In 2004, Amherst College in Massachusetts, from which he graduated in 1977, presented Middleton with its "Medal for Eminent Service," calling him "fiercely private and unfailingly modest." It said he has "consistently shunned the spotlight, concentrating instead on supporting his alma mater and inspiring others to do the same."
Middleton did not respond to requests for interviews yesterday.
The tobacco company has facilities in King of Prussia and Limerick. It claims to sell more five-cigar packages than any other brand.
The research group Information Resources Inc. estimates that the company holds about 24 percent of the total retail cigar market in the United States. Nearly all of its share, or 23 percent of the total market, comes from its Black & Mild brand.
Other brands include Gold & Mild cigars and four pipe tobaccos: Prince Albert, Carter Hall, Middleton's and Kentucky Club.
About 90 percent of the company's income comes from cigar sales, according to the sale announcement.
Altria said it would keep the operations - which employ 550 - in the Philadelphia area. Orrin Ridington Jr. will continue as president of Middleton, the Altria announcement said. Chief executive officer Clinton Price Sr. will retire as previously planned, but play an advisory role during the transition.
Middleton executives declined requests for interviews, instead releasing a statement expressing confidence that "Middleton will continue to be a key employer and a strong contributor to the economic growth of Pennsylvania and local communities. Current plans call for Middleton employees to maintain their current jobs, responsibilities and reporting structure."
Altria predicted that Middleton would produce 1.2 billion cigars this year and earn an estimated $182 million on sales of $360 million.
Michael E. Szymanczyk, chairman and chief executive of Philip Morris USA, called the acquisition "strategically compelling and financially attractive."
The cash cost to Altria will be $2.2 billion because of $700 million in tax benefits from the way the deal is structured, the company said.
Middleton's earnings have grown 13 percent annually since 2003, Szymanczyk said, and it "fits squarely with our announced strategy to grow our U.S. tobacco business beyond cigarettes."
The United States, he said, is the world's largest cigar market, smoking 40 percent of 10.5 billion stogies sold annually.
If approved by regulators, the transaction will be completed by year's end and be financed by existing cash, Altria said.
Being part of Phillip Morris will reduce supply costs, but "the real appeal of this acquisition is to capitalize on PM USA's sales, distribution, and marketing infrastructure and expertise," Szymanczyk said.
The acquisition comes as Altria prepares to spin off its Philip Morris International division. The board is expected to announce the exact timing of the spin-off Jan. 30. The split, analysts say, would free the international unit to more aggressively pursue sales in emerging markets without the legal and regulatory constraints the U.S. unit faces.
Altria's break-up plans call for consolidating domestic cigarette production in Richmond, Va., and moving all international manufacturing to plants outside the United States. Philip Morris International is based in Lausanne, Switzerland.
Besides the Philip Morris units, Altria owns a 29 percent stake in London-based SABMiller P.L.C., which brews Miller Lite beer.
Contact staff writer Henry J. Holcomb at 215-854-2614 or email@example.com
The Associated Press contributed to this report.
John Middleton's New Leaf
The company is being bought for $2.9 billion.
Founded: 1856 as a tobacco shop in Philadelphia.
Headquarters: King of Prussia.
Business: Manufacturer of large, machine-made cigars and pipe tobacco.
Factories: Limerick (opened 1998) and King of Prussia (opened 1960).
2007 revenue: $360 million, estimated.
2007 operating income: $182 million, estimated.
Profit margin: 50 percent, estimated.
2007 production: 1.2 billion cigars.
Large-cigar market share: 24 percent.
SOURCE: Altria Group Inc.