PMI Spin-Off "no Foregone Conclusion"

Source from:  tobaccoreporter.com USA, Wednesday, June 27, 2007 06/28/2007

Research analyst Filippe Goossens of Credit Suisse says Altria's long-anticipated spin-off of Philip Morris International is no foregone conclusion, adding that other ways exist to create shareholder value. On June 26, Altria announced it would be moving its U.S.-based cigarette production for non-U.S. markets to Philip Morris International facilities in Europe. Philip Morris USA would close its cigarette factory in Cabarrus, North Carolina, and consolidate manufacturing for the U.S. market at its Richmond, Virginia, manufacturing center. The announcement was widely seen as a prelude to the expected split of businesses. "If the market were looking for a definitive signal that Altria intends to spin off international tobacco, today's announced plant closures at PM USA and realignment to PMI in Europe all but give away the ending," said Marc Greenberg of Deutsche Bank. Goossens, however, believes that the case for a PMI separation is less obvious today than it was before, citing an improved U.S. litigation environment and the fact that company's share price discount to international peers has all but evaporated, among other factors. While Credit Suisse's analysis still points toward a spin, Goossens says that, in the long run, the Altria could actually benefit by staying together as one powerful global company. "A major share buyback, significant cost cutting, a successful "adjacency" strategy [snus, cigars etc.] and accelerated expansion into emerging markets could likely create at least the same amount of shareholder value without weakening MO's [Altria's] strategic positioning," he said. Enditem