Breaking Up Altria Makes No Sense

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This week, Altria (MO) will probably announce that it will split its domestic and international operations into separate companies. The reason would be to allow the overseas operations to be "unfettered by legal and public relations problems in the U.S.."  The deal would give Philip Morris International its own stock to pursue acquisitions as well.

But, none of this makes much sense. The legal woes of MO in the US are mostly behind in it. There is no reason to think that cash flow or earnings would improve if the two companies were apart. Keeping the current global company intact means that if any one region faces slowing revenue growth, it can be picked up by others.

A look at the last MO 10-Q shows that international revenue grew 13% to $13.948 billion. Domestic revenue grew a fraction to $4.809 billion. And, those numbers are a good indication that shares of a new domestic company would drop in value as the international shares would rise. At least show term.

How are investors helps by going from owning one fairly strong stock to one that is weak (domestic) and one that is strong. (international).

They aren’t.

Douglas A. McIntyre