NEW YORK (AP) -- Altria Group, which owns Marlboro-maker Philip Morris USA, said Friday 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.

Shares of Stamford, Conn.-based UST Inc. jumped $12.37, or 23 percent, to $66.37 by midday Friday on the news. Shares of Altria rose 34 cents to $21.

Altria formally split Philip Morris USA from Philip Morris International in March, and has pursued cigarette alternatives to make up for the stronger sales growth at its overseas sibling. U.S. cigarette consumption has been falling by about 3 percent to 4 percent annually.

So parent company Altria bought cigar maker John Middleton Inc. in December 2007, and Philip Morris USA has tried to sell smokeless products under its own brands. The company's efforts to sell Marlboro-brand smokeless products has not gone especially well, analysts say.

"If it is a raging success, I think we would hear much more in the way of chest-thumping than we have," Kaufler said.

Worldwide, the tobacco industry has been consolidating. Kaufler said another target could be Lorillard, which was spun off in the past year from its parent company, New York-based conglomerate Loews Corp. The spin-off positioned Lorillard -- the maker of Newports, Kents and Trues -- as a possible acquisition target, but Kaufler said tax restrictions may mean a deal for Lorillard is two years away or more.

Associated Press Writer Michael Felberbaum in Richmond, Va., contributed to this report.