Altria Group about to announce its divestment plan
Altria Group Inc. triggered one of the busiest days of trading in its shares in a year simply by announcing that it planned to disclose a timeline for the divestment of its majority stake in Kraft Foods Inc.
This week, investors expect to learn details of the plan that created that late October burst of Wall Street activity. Analysts say it could call for breaking the food and tobacco company into as many as three parts.
Altria is expected to announce Wednesday the timing for distribution of its 88.6% stake in Kraft to its own shareholders.
It is an event that analysts and investors have been anticipating since the decision to restructure was disclosed in November 2004.
The path for Altria’s announcement was cleared by court decisions in July and October in two major class-action cases. The first was favorable for the company while the second was not, but both contributed to a more stable litigation environment, which ultimately led the company to set Wednesday as the day it would announce when the share transfer would occur.
Morgan Stanley analyst David Adelman said he did not believe the plan would face any serious legal challenges.
“Investor enthusiasm for the anticipated Kraft Foods spin-off is understandable in light of its significant strategic logic and shareholder value creation potential,” Adelman wrote in a research note released Friday.
Once Altria announces the stock dividend, the company has 120 days to complete the spin-off. That means the Kraft shares are likely to be released to investors, and potentially to the market, sometime before the end of May.
Kraft and Altria, which also owns Philip Morris USA, Philip Morris International and a 28.7% stake in the brewer SABMiller, will announce fourth-quarter and year-end results Wednesday.
Philip Morris USA is the biggest cigarette maker in the nation and holds nearly half of the total market, selling the Marlboro, Virginia Slims, Parliament and Basic brands.
Kraft, the second-largest food and beverage company in the world, sells products such as Kraft cheese, Maxwell House coffee, Toblerone chocolates and Ritz crackers.
Altria Chief Executive Louis Camilleri said in November that the timing of the Kraft divestiture depended both on litigation and the readiness of Kraft Foods CEO Irene Rosenfeld to achieve strong and predictable growth. She is scheduled to outline her plans next month.
There has also been speculation that Altria could separate its domestic and international tobacco businesses into stand-alone companies.
The domestic tobacco business also stands to gain from legislation that is expected to be introduced within weeks that would allow the Food and Drug Administration to regulate certain aspects of the manufacturing, distribution and sale of cigarettes.
Sen. Edward M. Kennedy (D-Mass.) and Rep. Henry A. Waxman (D-Los Angeles) are expected to introduce the legislation for a third time, and it is given a better chance of passage since Democrats control both the House and Senate.
Its passage may restrict advertising, which could hurt smaller companies trying to win new customers and help Altria strengthen its position as market leader, some rivals argue.
Shares of Altria rose 15 cents Friday to $88. They have traded in a 52-week range of $68.36 to $90.50. Kraft fell 22 cents Friday to $34.54. They have traded in a 52-week range of $28.43 to $36.67.
