NEW YORK -- The board of directors of Altria Group Inc. voted Wednesday to authorize the spinoff of all shares of Kraft Foods Inc. owned by Altria to Altria's shareholders on March 30.
The board also announced that, at its request, Altria CEO Louis C. Camilleri will step down as chairman of Kraft but continue to serve on the board. Kraft CEO Irene Rosenfeld will be elected to the additional post of chairman.
Also, Dinyar Devitre and Charles Wall will step down from the board, and a lead director will be appointed from among the [image-nocss] board's independent directors.
I believe that an independent Kraft will enjoy enhanced flexibility to grow its business and be in a substantially stronger position to create enduring shareholder value, Camilleri said.
The separation of Altria and Northfield, Ill.-based Kraft will benefit both parties, Altria said, and will enhance Kraft's ability to make acquisitions, including by using Kraft stock as acquisition currency, to compete more effectively in the food industry; allow management of Altria and Kraft to focus more effectively on their respective businesses and improve Kraft's ability to recruit and retain management and independent directors; provide greater aggregate debt capacity to both Altria and Kraft; and permit Altria and Kraft to target their respective shareholder bases more effectively and improve capital allocation within each company.
As of Dec. 31, 2006, Altria owned approximately 89% of the outstanding common shares of Kraft and 100% of the outstanding common shares of Philip Morris International Inc., Philip Morris USA Inc. and Philip Morris Capital Corp. It also owned approximately 28.6% of SABMiller plc. The brand portfolio of Altria Group's consumer packaged goods companies includes such names as Kraft, Jacobs, L&M, Marlboro, Maxwell House, Nabisco, Oreo, Oscar Mayer, Parliament, Philadelphia, Post and Virginia Slims.
Citigroup analyst Bonnie Herzog said in a reseach note, Everything thus far is lining up as we had been anticipating, but what happens in the months before the spin occurs, should be of interest to shareholders. We maintain our nonconsensus view that it is quite likely (70% chance) an injunction is filed against [Altria] in an attempt to enjoin the company from its plans to spin [Kraft].
She added, We strongly believe the company will ultimately succeed in defeating any injunction attempt.
The distribution of the approximately 89% of Kraft's outstanding shares owned by Altria will be made on March 30, 2007, to Altria shareholders of record as of 5:00 p.m. ET March 16, 2007.
Altria will distribute approximately 0.7 of a share of Kraft for every share of Altria common stock outstanding as of the record date, based on the number of Altria shares outstanding on that date. Altria shareholders will receive cash in lieu of fractional shares for amounts of less than one Kraft share. The exact distribution ratio will be determined on the record date.
As a result of the spinoff changes, the Altria board will be comprised of the following directors: Ajay Banga, Jan Bennink, Louis Camilleri, Richard Lerner, John Pope, Irene Rosenfeld, Mary Schapiro and Deborah Wright, all of whom have been nominated for reelection at the 2007 annual meeting.
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