Altria plans to spin off Philip Morris

January 30, 2008 8:32:43 AM PST
Altria Group said Wednesday it would spin off its international tobacco business on March 28, freeing it to pursue cigarette sales more aggressively outside the U.S. by separating it from its American counterpart.The two tobacco units each make Marlboros, one of the world's top-selling cigarette brands.

Lausanne, Switzerland-based Philip Morris International has said that it would rank as the biggest non-governmental cigarette maker in the world, behind the state-owned China National Tobacco. PMI makes Marlboros, L&M and Bond Street cigarettes, while Philip Morris USA makes the Marlboro, Virginia Slims, Parliament and Basic brands for U.S. consumers.

The separation could shield Philip Morris International from U.S. legal and regulatory issues, such as pending legislation to give the Food and Drug Administration the authority to restrict tobacco advertising, regulate warning labels and remove hazardous ingredients.

Critics of the spinoff say it gives the international unit the chance to unleash its marketing on nonsmoking women and children in poor, developing countries.

Once the spinoff to Altria shareholders is complete, New York-based Altria will consist mainly of it domestic cigarette business Philip Morris USA and a 28.6 percent stake in London-based beer company SABMiller, which makes Miller Genuine Draft, Pilsner Urquell and Snow. Altria plans to shut down a Park Avenue headquarters and move to Richmond, Va., where Philip Morris USA is based.

The plan to give PMI its independence is part of a multiyear restructuring that started with the spin off of Altria's majority stake in Kraft Foods Inc. in March of last year.

The spin-off will be done through a distribution of one PMI share for each Altria share.

Altria also announced plans for dividends and share buybacks after the spin is complete.

Altria shareholders would get an annual dividend of $1.16 per share, and the company would buy back $7.5 billion worth of shares over two years. Philip Morris International shareholders would get a dividend of $1.84 a share, with buybacks of $13 billion over two years.

Altria projected earnings per share growth of between 9 percent and 11 percent this year, while PMI earnings per share was expected to grow at a slightly higher 12 percent to 14 percent rate.

Shares of Altria Group Inc. rose 72 cents to $76.84 after the announcement. Its shares are near the high end of their 52-week range of $60.91 to $79.59.

(Copyright 2008 by The Associated Press. All Rights Reserved.)