Altria to spin off Philip Morris International

Altria to spin off Philip Morris International

Altria to spin off Philip Morris International

Altria Group Inc., the world's largest tobacco company, plans to spin off Philip Morris International after being pressured by investors who want faster overseas growth and less risk from US smokers' lawsuits.

 

A final decision on the timing will be disclosed at a board meeting Jan. 30, Altria said yesterday. The company also boosted its dividend 8.7 percent to 75 cents a share.

 

A spinoff would complete the breakup of the former Philip Morris Cos., which traces its roots back to a London tobacconist in 1847, and leave it with the US cigarette operations. Chief executive Louis Camilleri in March spun off Altria's 89 percent stake in Kraft Foods Inc., the world's second-largest food company.

 

"Ultimately it is the right move," said Thomas Russo, a partner at Gardner Russo & Gardner in Lancaster, Pa. He expects the international and US companies to initiate a "generous share buyback program and pay a substantial dividend."

 

Camilleri, 52, would take over as chairman and CEO of Switzerland-based Philip Morris International. Michael Szymanczyk chief of Philip Morris USA, would become Altria's chairman and CEO.

 

"The opportunity here is to enhance our growth rate," Camilleri told analysts on a conference call. Altria also has a stake in brewer SABMiller PLC.

 

A separation of the two units will allow for savings of at least $250 million, including the closure of Altria's New York headquarters, Camilleri said.

 

About two-thirds of Altria's 600 New York jobs will be cut, he said. Some employees will be offered transfers to the Richmond headquarters of Philip Morris USA.

 

The US unit, which accounts for one of every two cigarettes sold in the United States, is dwarfed by Philip Morris International. The overseas division accounts for two-thirds of profit and three-fourths of revenue, and its shipments are rising while US volumes decline.

 

The decision on the spinoff will be based on several factors, including a tax ruling from the Internal Revenue Service and the execution of several intercompany agreements, the cigarette maker said.

 

Camilleri bowed to shareholders who favored the separation of Altria's international unit from legal risk and falling cigarette consumption in the United States.