Altria split all in the game
Sometimes
mergers and acquisitions are like a bellows, blowing in companies and
then, in alternation, blowing them out, That's the case now with Altria Group, a 2003 renaming of Philip Moris
once the combination of three industry-leading "merchants of death":
tobacco (Philip Moris), beer (Miller) and junk food (Kraft), Majority
interest in Miller was sold to South African Brewing in 2002 to form SAB Miller, Now, Altria is getting rid of Kraft, leaving it with the tobacco company.
Kraft, the seller of Velveeta, Miracle Whip, and Oreos, will be a $57 billion a year company. But, as a Wall Street Journal
story ("Kraft Could Look Tasty", 2/1/06) notes, its revenue have
stagnated under the Altria umbrella, while rivals like Nestle, General
Mills, and Kellogg have prospered.
This might mean that the
purer play food company will change strategy and get back on the
acquisition trail. Or it ay mean that Kraft will itself become an
acquisition target, perhaps for some cash rich private equity group,
thanks to its steady revenue stream and its easily sellable divisions.
Meanwhile,
Altria's sell off is being looked at favorably by the stock market, as
smoking is seen as even more fundamental than food. As one analyst is
quoted as saying ("Tobacco's Stigma Aside, Wall Street Finds a Lot to
Like", 1/31/06, Wall Street Journal): "If frozen dinners
get too expensive, people will try something else. That's not true with
cigarettes - you are not up at night worried about that product that is
going to make cigarettes obsolete."
The tables are turned-- tobacco was once seen as a drag on Altria, now food is a drag on suddenly tighter tobacco market.
Once again, a company extended and then draws back, enthusiastically
becoming conglomerate and then backing off to a more unified business.
Corrected 2/4/07
