Special Situation Investing

Thursday, April 06, 2006

(KFT) Kraft Potential Spinoff

Looks like Kraft might be a potential spin-off (85% owned by Phillip Morris (MO). A date has not been set yet, as they are still waiting to clear some lawsuits. To quote from Reuters:

"The "lights" case has been closely watched not just because of the size of the ruling, but because it is one of the legal hurdles management has said need to be cleared before it could spin off Altria's Kraft Foods Inc. (NYSE:KFT - News) business from its tobacco businesses."

What really drew my attention to Kraft, was this bit on a post-spinoff sellof, from Buisness Week:

" But some analysts wonder if the market will welcome another helping of Kraft, whose margins have been shredded of late. Shares are down 12% from their 52-week high and trade 4% below the IPO price. If Altria shareholders decide they don't want Kraft, the subsequent sell-off would put more pressure on an already struggling stock.

Complicating matters, Altria's now 87% stake in Kraft is worth $43.5 billion. The value of large-cap food stocks in the hands of public investors is roughly $100 billion. So post-spin, Kraft would account for one-third of the industry, a huge hunk of cheese for the market to digest.

Not a perfect stock by any means but nevertheless, large-scale selling may create a bargain.


Post a Comment

<< Home