Altria Plans Overseas Cigarette Spinoff

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By VINNEE TONG
The Associated Press
Wednesday, August 29, 2007; 5:15 PM

NEW YORK -- The Marlboro man is packing his saddle bags.

With the Wednesday announcement that it would spin off its Philip Morris International cigarette business, Altria Group Inc. moved forward on a plan that will ultimately put the biggest seller of Marlboro brand cigarettes in Lausanne, Switzerland.

The spinoff will shrink Altria to include Philip Morris USA, the biggest cigarette maker in the U.S., and a 29 percent stake in London-based SABMiller PLC, which brews Miller Lite beer.

When the spinoff is complete, Altria plans to close its Fifth Avenue headquarters in Midtown Manhattan and lose about 400 jobs in the process, with some employees possibly relocating to a new headquarters to be established in Richmond, Va., where Philip Morris USA is based. That plan is projected to save at least $250 million annually.

Its chief executive, Louis Camilleri, will take over the larger Philip Morris International, to be run out of its Switzerland headquarters and a smaller New York office. The company's primary listing would be on the New York Stock Exchange.

The move is a return of sorts for Camilleri, who joined Philip Morris Europe in 1978 and worked for the international division until the mid-1990s.

The spinoff is designed to give the overseas maker of Marlboros and other cigarette brands more freedom to pursue sales growth in emerging markets, and some anti-tobacco critics have said that gives it the chance to unleash its marketing on nonsmoking women and children in poor, developing countries.

"They're building a firewall between themselves and the increasingly negative and regulatory environment in the states," said Damon Moglen of the Campaign for Tobacco-Free Kids. That firewall could help shield Altria from U.S. legal and regulatory issues, which include pending legislation to give the Food and Drug Administration authority to restrict tobacco advertising, regulate warning labels and remove hazardous ingredients.

And in the so-called Kessler lawsuit, Altria and other tobacco companies have been ordered to stop using the words "light" and "low-tar" in marketing cigarettes. U.S. District Judge Gladys Kessler ruled that would also apply to PMI, but enforcement of her decision is on hold as the case is appealed.

The company's board announced Wednesday that it would finalize its decision and give the exact timing of the spinoff at its board meeting on Jan. 30.

PMI's current CEO Andre Calantzopoulos has agreed to become its chief operating officer and president, reporting to Camilleri.

Succeeding Camilleri at Altria would be Michael E. Szymanczyk, the current CEO of Philip Morris USA.


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© 2007 The Associated Press

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