Friday, February 02, 2007

Kraft carveout and spin-off

This is a great one for class! Not only does the article discuss the carve-out and spin-off, but the SF Chronicle piece talks about valuation (including EBITDA multiples!), multiple classes of shares, and socially responsible investing.

  • carve-out: IPO of a part of company (In this case this happened in 2001, when Kraft began trading publicly. Altria (the parent who some still call Philip Morris) holds 89% of the shares.
  • spin-off: dividend distribution of a portion of company (if over 80% is given, it is considered tax-free)
From Altria itself:
"The Board of Directors of Altria Group, Inc. voted on January 31, 2007, to authorize the Spin-off of all shares of Kraft Foods Inc. owned by Altria to Altria's shareholders.

From RTT News:
"The New York-based company said the distribution of about 89% of Kraft's outstanding shares owned by Altria will be made on March 30 to Altria shareholders of record on March 16.

Under the spin-off plan, Altria shareholders will receive about 0.7 share of Kraft for each Altria share they own. Fractional amounts will be paid in cash. The exact distribution ratio will be determined on the record date.

from the San Francisco Chronicle
"Philip Morris will still own 84 percent of Kraft's stock and control more than 97 percent of its voting rights....Philip Morris is selling 280 million to 308 million Class A Kraft shares to the public. Class A shares have one vote each. After the offering, Philip Morris will still own 49.5 percent of Kraft's Class A shares and 100 percent of Kraft's Class B shares, which have 10 votes each."

from MSNBC:
"Its break-up comes as other diversified groups are pursuing similar strategies in response to investor disaffection with sprawling conglomerates.

In the next few months, Tyco will try to move beyond its scandal-ridden recent history by splitting into its three main divisions. Cedant, the real estate-to-travel agency group broke itself up last year.

Even General Electric, one of the most successful conglomerates, has embarked on a spree of acquisitions and divestitures to refocus on higher margin industries."

Definitely class worthy!!!!

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