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NEW YORK-Kraft Foods may not have to wait much longer to break off from tobacco company parent Altria. Analysts said a federal ruling last month could speed the process.
A decision issued Aug. 17 removes a legal cloud that had been hanging over the industry and also, importantly, removes a great deal of the uncertainty that had been holding back the breakup of the world's largest cigarette maker.
Judge Gladys Kessler ruled that tobacco companies deceived smokers about smoking's hazards, but she said she did not have the ability to award substantial financial penalties. The Department of Justice had sued tobacco companies, seeking $14 billion to fund smoking cessation programs and public education campaigns.
"Yesterday's ruling is just about as good as it gets from the tobacco industry's perspective and, in our view, is exactly the type of ruling that should make the Altria board feel comfortable with spinning off Kraft," Prudential Equity Group analyst Robert Campagnino said in a research report.
Altria's restructuring plans include the spin-off of the Kraft Foods unit and the split of its two tobacco divisions, Philip Morris USA and Philip Morris International, into separate companies.