There is a long push-pull effort among investment banking advisory trends in which Wall Street tells corporate America how it should be positioning itself. Back when Altria Group Inc. (NYSE: MO) was known as Phillip Morris, the company decided it was time to break out the international portion of its business. That international component is Philip Morris International Inc. (NYSE: PM) today and has a market value of $120.9 billion, at least after a 4% drop a day earlier.

Now comes an announcement by Philip Morris International that it is currently in discussions with Altria to recombine the companies into one. The potential merger effort is being called an all-stock transaction and a merger of equals. Altria’s stock was valued at $88 billion after Monday’s 1.5% gain.

The post-news reaction sent Altria shares up 8% to $51.10 and Philip Morris International shares down about 3.2% to $75.30 in Tuesday’s early trading. Note that Altria also just announced a dividend hike that will give it better than a 7% dividend yield.

According to Philip Morris International’s press release on Tuesday:

There can be no assurance that any agreement or transaction will result from these discussions. Additionally, there can be no assurance that if an agreement is reached, that a transaction will be completed. Any transaction would be subject to the approval of the two companies’ boards and shareholders, and regulators, as well as other conditions.

Philip Morris International also is entering into a self-imposed quiet period of sorts. The company noted in its release that it intends to make no further comment about these merger discussions, unless and until it is appropriate to do so.

Altria investors enjoyed the split of American tobacco from international tobacco operations because it set the stage for what legal woes the companies might have. The international outfit is the one with exposure to future legal woes in foreign markets, but the Altria legal woes are now two decades behind it, for the most part.

Short sellers are technically not that active in Altria or Philip Morris International, given that less than 1% of the float in each is short. Still, short sellers had been lightening up their positions ahead of this news. The short interest in Altria fell to 12.65 million shares in mid-August from 13.33 million in late July. Philip Morris International’s short interest dipped to 10.01 million shares from 11.27 million short at the end of July. On top of short sellers having to pay to borrow the tobacco stocks, having dividend yields of 6% to 7% makes it an expensive cost to carry.

Wall Street tells big companies that they need to break themselves into smaller pieces to unlock the growth potential. Then a decade or so later, Wall Street tells them they would offer a better value proposition as a combined company again.

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