Philip Morris studies splitting off tobacco unit

April 15, 1994|By New York Times News Service

NEW YORK -- As the siege against the tobacco industry continued yesterday in Congress, where tobacco executives denied that cigarette smoking was addictive, the industry leader, Philip Morris Cos., Inc. said it was studying the possibility of splitting its tobacco business from its food and beer operations.

In a brief statement issued late yesterday, the company said that its board was investigating such a separation, among other ideas.

No company executive was available for further comment.

Stock analysts were unsure what to make of the announcement, other than to acknowledge that a split would probably make sense at a time when the tobacco business is being assailed by health groups, federal agencies and lawmakers.

"We don't really know if they are studying a separation or really studying a separation," said Emanuel Goldman, an analyst who follows Philip Morris for Paine Webber.

"But if they are seriously considering a separation, that would be very interesting in terms of the valuation of the separate companies."

A split would be intended to improve the value of the company by letting investors choose between a more conservative channel for their dollars -- food and beer -- or the high-margin business of tobacco that is nonetheless vulnerable to the politics of the day.

In the current combination, several analysts agreed, the value of the nontobacco units is being held down.

After trading yesterday, Philip Morris stock was up $1, at $48.125. But that figure was more than 20 percent off the $60.25 price of just 10 weeks ago, a drop that could easily be tied to the latest attacks against the tobacco industry.

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