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January 31st, 2008:

Altria Sets Date For Tobacco Break-Up

By Christopher Bowe in New York – Financial Times

Published: January 31 2008 02:01 | Last updated: January 31 2008 02:01

Altria on Wednesday set a date for the long-awaited spin-off of Philip Morris International, putting in motion the break-up of the world’s largest cigarette maker.

The move, due on March 28, will allow investors a choice between the fast-growing international operations and the remaining Altria business, which is tied to the declining US market.

Under a stabilising US tobacco litigation environment, Louis Camilleri, chief executive, has moved to break up Altria, which was viewed more valuable in pieces than together. Last year, it completed the spin-off of Kraft, its US food group.

The spin-off also decouples PMI from some US litigation concerns and gives it stock to use as currency in rapid industry consolidation. It also allows Altria to make its own strategic moves for the domestic business.

Putting the final details on the spin-off plan, launched last August, Altria said the companies would be focused, flexible and financially powerful to compete in their markets.

After the split, PMI and Altria will launch share repurchases of $13bn and $7.5bn respectively over two years, and will pay dividends of $1.84 and $1.16 this year.

Mr Camilleri will become chief of PMI, which will be based in Lausanne, Switzerland, and maintain an office in New York.

Altria will close its New York office and be based in Philip Morris’s long-time home of Richmond, Virginia. The group will comprise Philip Morris USA and also retain its minority stake in brewer SABMiller. It will be headed by Michael Szymanczyk, chief executive of PMUSA.

Under the deal, shareholders of Altria as of March 19 will receive one share of PMI for each share they hold of Altria.

PMI will trade on the New York Stock Exchange under the planned symbol of PM, Altria said.

On Wednesday Altria provided an upbeat financial outlook for the separate businesses this year. It expects PMI’s earnings to increase 12-14 per cent from last years $2.78 per share.

Altria’s US business is expected to rise 9-11 per cent from last years $1.50 per share. Last year, Altria’s revenues increased 10 per cent to $73.8bn. US revenues were flat at $18.5bn, while total international tobacco sales rose 14 per cent to $55bn.