Altria Board Agrees to Divestment of Kraft Foods

02 February 2007

NEW YORK: In a move that will likely please all concerned - the respective boards of Altria and Kraft Foods, their investors and the Wall Street divestment vampires - the former has decided to spin-off the latter from its mainstream Philip Morris tobacco manufacturing business.

The long-expected separation is underscored by a grim irony: that tobacco, despite its associations with cancer and death, remains a more rapidly expanding and profitable business than food.

That anomaly is reflected by the two companies' respective Q4 results, also announced Wednesday. Altria's quarterly profit rose year-on-year by 29.2% to $2.96 billion (€2.27bn; £1.51bn), whereas Kraft's net income fell by 19.3% to $624 million.

Says Altria ceo Louis Camilleri, who currently also chairs Kraft: "Tobacco has grown faster than food. All our competitors are pure-play tobacco companies and I think today focus is very important . . . the market rewards focused players rather than diversified conglomerates."

No timetable was announced for the divestment of the globe's second largest food manufacturer (after Nestlé), nor which investment banks are currently salivating at the prospect of a killing.

Data sourced from Financial Times; additional content by WARC staff