Altria to Spin Off Rest of Kraft
Wednesday, January 31, 2007; 6:41 PM
NEW YORK -- Now that Altria is poised to jettison its Kraft Foods subsidiary, investors expect the payoff will be a higher share price as the company transforms into almost purely a tobacco company.
Altria Group Inc., whose tobacco operations make the top-selling Marlboro cigarette brand, plans to spin off its majority stake in Kraft Foods Inc. in March.
That will leave Altria consisting primarily of tobacco units Philip Morris USA and Philip Morris International and a stake in beer maker SABMiller PLC.
Altria's announcement Wednesday had been widely anticipated by Wall Street as the first step in a restructuring plan designed to make the company more valuable to investors. Some market watchers believe Altria's share price has not benefitted as much as its should from a rise in the tobacco sector this year.
"2007 is poised to be a key year in the evolution of our company," Chief Executive Louis Camilleri said.
The spinoff potentially could be halted or at least stalled if plaintiffs in cases pending against the company seek a court order to stop it. Analysts have said such an effort is unlikely to succeed.
Kraft Foods, the second-largest food and beverage company in the world, sells products such as Kraft cheese, Oreo cookies, Ritz crackers and Maxwell House coffee.
The distribution of Altria's 89 percent stake in Kraft to Altria's shareholders will be made on March 30 to shareholders of record as of March 16. Altria will distribute about 0.7 of a share of Kraft for every one share of Altria. The exact ratio will be determined on he record date.
Kraft, based in Northfield, Ill., has been trading on its own since a 2001 public offering that left Altria with a majority stake in the business.
Altria said the split boosts Kraft's ability to make acquisitions, allows managers to focus their respective businesses and gives both companies greater debt capacity.
"Once they spin off Kraft, you'll be left with a tobacco business operating in a strong environment, with a vastly improved legal environment, substantial free cash flow and an unleveraged balance sheet," said Charles Norton, portfolio manager of the Vice Fund, which invests at least 80 percent of its assets in companies that make products deemed "socially irresponsible."
Analysts and investors have eagerly awaited the restructuring since plans for it were outlined in November 2004.