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CHICAGO -- Altria Group Inc.'s CEO said the company has begun preparing itself for a possible breakup, once tobacco lawsuit hurdles are cleared, to realize fair value for its tobacco business, according to Reuters.
Shares of Altria, which owns Philip Morris USA, Philip Morris International and about 85 percent of Kraft Foods Inc., jumped almost 10 percent. Shares of Kraft rose almost 3 percent.
Chairman and CEO Louis Camilleri said during an investor conference that the company's Philip Morris tobacco businesses are significantly undervalued when compared with their peers. "Our overriding objective is to deliver superior returns to our shareholders, and toward that end, we are working to resolve the litigation issues at PM USA and beginning the necessary preparations for a potential breakup once the litigation environment permits," he said.
Kraft Foods has struggled in recent months as consumers have eschewed foods like Oreo cookies amid concerns about growing obesity and the popularity of low-carbohydrate diets.
Financial analysts have long said the company is likely to spin off Kraft after several tobacco lawsuits have been finally adjudicated, though Camilleri's comments Thursday were the strongest the company has made to date about a spinoff. Analysts have also said the company could split up its U.S. and international tobacco businesses.
Yesterday, the Florida Supreme Court heard arguments about whether it should reinstate a $145 billion class-action verdict against the company and other cigarette makers that was overturned by an appeals court. That case is known for the pediatrician who is a plaintiff, Howard Engle.
Next week, the Illinois Supreme Court will hear arguments over a $10.1 billion verdict against Philip Morris USA over whether it deceived consumers into thinking "light" cigarettes were less dangerous than regular ones. That case is known as the "Price case," for a plaintiff.
The company is also part of a major lawsuit being tried in Washington brought by the U.S. Department of Justice.
"We've been pretty clear that what we have to see is victory in the Price, DOJ and Engle cases, that we can manage the (other) lights cases and that there won't be some new novel theory from the plaintiffs side," Camilleri said, answering an analyst's question. The company hopes to have rulings in the three big cases by next summer.