Kraft to become independent Chicago HQ?

Kraft may eventually spin off from New-York based Altria group. This is a good thing, since it will finally become an independent corporation in Chicago not owned by an outsider. Here's the article: October 23, 2004 Kraft's pruning could set up spinoff Either way, investors like talk of shedding slow-growth businesses By Julie Jargon Rumors swirling around Kraft Foods Inc. have it mulling the sale of divisions with a combined value of $13 billion. Regardless of which are sold, slimming down would help prepare Kraft for a spinoff from parent Altria Group Inc. There's speculation that Kraft is putting brands on the block, from Altoids and Life Savers to Post cereal and Oscar Mayer. The candies alone could fetch $1 billion-plus. continued below Advertisement "Their free cash flow is $2.6 billion a year, so why is Kraft raising cash when cash is not a problem?" asks Mark Hugh Sam, an analyst at Chicago investment researcher Morningstar Inc. "Although this is purely speculative, getting ready to be spun off by Altria could be part of it." In a spinoff, Kraft might need cash to pay a large dividend to New York's Altria, which owns almost 85% of Kraft's shares. Altria CEO Louis Camilleri has said it would make sense for Altria and Kraft to part ways. Some investors agree, arguing that untying Northfield-based Kraft from its tobacco-producing cousin, Philip Morris USA, would sever the link to litigation — and lift the stock. Investors at Davis Selected Advisers, with 7.9 million Kraft shares, are eager for that. "We hope this spinout might be accomplished over the next two years," Davis managers wrote recently. Even so, some investors don't see brand sales as a sign a spinoff is coming. Thomas Russo, a value investor at Gardner Russo & Gardner, a Pennsylvania money manager with 1.7 million shares of Kraft, says unloading brands is "consistent with a more focused management approach." Sources close to the situation say Kraft has hired UBS to sell Life Savers and Altoids; Citigroup is said to shopping Breyers yogurt. Kraft won't comment. Spinoff or no, a slimmer Kraft is attracting value investors like Mr. Russo, as well as Clipper Fund Inc. and Harris Associates L.P. Clipper and Harris each has increased its Kraft holdings by more than 2 million shares over the last year. Kraft stock hasn't strayed much from its 2001 IPO price: $31 a share. "Normally, you don't find a company of Kraft's quality . . . trading for only 14 times earnings," says Morningstar's Mr. Hugh Sam, referring to the roughly $28 share price when Clipper and Harris upped their stakes. (Kraft traded near $33 last week, roughly 17 times projected 2004 earnings.)>