NEW YORK -- Altria Group, which owns Richmond-based Philip Morris USA, said today that a report of its impending acquisition of UST was "pure speculation." Analysts said the deal makes perfect sense.

The New York Times reported late Thursday that Altria, which owns the nation's biggest cigarette maker, was in discussions to buy UST for more than $10 billion. An official announcement could come as early as Monday, the report said.

A deal would be in line with Altria's strategy to pursue cigarette alternatives, as the U.S. market for smokes declines. UST Inc. is a market leader in smokeless products, with the Skoal and Copenhagen brands.

Altria Group Inc. spokesman David Sutton declined to say whether the deal was being discussed.

"There's nothing to say," Sutton said. "It's pure speculation from our perspective at this point. As a matter of policy, we don't comment on speculation of this kind."

UST spokesman Tom Fitzgerald declined to comment.

Observers, meanwhile, said the deal would make sense for Altria in the current market.

"There is a logic to the deal," said Matthew Kaufler, portfolio manager of the $190 million Touchstone Value Opportunities Fund. Kaufler said he is confident the two companies have talked in the past, so any revival of discussions would not be surprising.

He also said Altria has had limited success trying to sell Marlboro-branded smokeless products, so the acquisition would help with that.

Since American smokers are buying fewer cigarettes, tobacco companies are forced to look for sales growth from alternatives such as cigars, chewing tobacco and snus -- tea bag-like tobacco pouches placed between a cheek and gums that are popular in parts of Europe.

"From a strategic point of view, [the] logic of a deal looks indisputable," Deutsche Bank analyst Marc Greenberg wrote in a note to investors. Greenberg said UST is dominant in the smokeless tobacco business, which is an expanding part of total tobacco profits and growing at 6 percent or 7 percent this year.