Special Situation Investing

Monday, October 30, 2006

Altria (MO) Spinoff of Kraft Moving Along

Conglomerate, Altria (MO), most famous for it's cigarette business, has announced that it is closer to finalizing it's spinoff of Kraft foods. From the article:

Earlier, the New York company announced it plans to finalize its decision, including the precise timing, of its distribution of its 88.6% stake in Kraft at its Jan. 31 board meeting. That announcement came in conjunction with the release of the company's third-quarter results.

Altria faces Massive law suits over it's tobacco business. This has caused the decision to be delayed thus far due to concerns over litigators rights to MO's assets. Of course, the lawsuits should have no bearing on Kraft once separated.

Traditionally you would expect Kraft to be a good spinoff (generating short-term institutional selling and a good buying opportunity) as it is a markedly different business from it's parent company. However, I believe you will see the opposite in this case as MO's lawsuits are likely holding the valuation of the Kraft business down.

One final comment, MO has been cited as 1 of the best-performing long-term stocks ever (over a 46 year time span). This is just another example of how vice can sometimes pay, and one of the reasons I am still holding my Take Two Interactive. If you are interested in the reference, before you click on the link, I warn you that it goes to the Motley Fool. I couldn't find the stat anywhere else. Link here.


  • I believe it's more accurate to say "Altria had faced massive lawsuits." The litigation climate has greatly improved with the Oregon case the last real big hurdle. One reason they announced the Kraft spinoff last week was because of this improved climate. Just a thought.

    By Blogger Jammu, at 2:56 PM  

Post a Comment

<< Home