Two weeks after the Florida Supreme issued its ruling in the Engle class action appeal which vacated the US$ 145 billion punitive damages against the tobacco industry, tobacco analysts expect an earlier than anticipated break-up of Altria.

"We continue to think Altria may wait for a decision in the DOJ case," says Bonnie Herzog of Citigroup. "After that, we expect the market to be very focused on how Altria manages the capital
structure of its remaining global tobacco business. The more significant upside move in the stock should occur once Altria breaks apart the US tobacco business from its international one. Our thesis is that the board could provide the market with an upside surprise and spin off Philip Morris International (PMI) much earlier than anticipated. In our opinion, there are several reasons why the board might decide to spin off PMI quickly. One of the main reasons is that the company would have the ability to use PMI’s stock as currency if it so chooses to make acquisitions internationally. There is no doubt that PMI will be aggressive in playing a leading role in any form of global consolidation in the future. Therefore, we think once Kraft Foods is spun off, Altria's board could announce a spin off of its international tobacco business (PMI) in a tax free spin to shareholders within three to five months, which is much earlier than current consensus expectations of nine to twelve months." (cg)