Altria Group Inc (MO)

[EZ2]

Indie Research
Post Spin-Off, Kraft Could Have an Eye for Buyout Targets
Tuesday February 13, 5:20 pm ET
By the BullMarket.com Staff

Following its spin-off from parent company Altria Group (NYSE: MO - News), Kraft Foods (NYSE: KFT - News) could be planning to make an acquisition or two, according to the speculation of one Wall Street analyst. UBS analyst David Palmer said in a note to clients that the completion of Kraft's restructuring plan following its spin-off from Altria could open the door for the company to combine with a rival, extending the firm's global reach.
Palmer named HJ Heinz (NYSE: HNZ - News), Groupe Danone (NYSE: DA - News), and Cadbury Schweppes (NYSE: CSG - News) as potential targets. In Palmer's view, Kraft's desire to beef up would likely come from a position of weakness, since the company "needs to acquire international scale to globe-trot with its major retailer partners and improve its margins." Nonetheless, ahead of the spin-off, Palmer upgraded his rating on Kraft from "reduce" to "neutral," and raised his price target from $33 to $34.

Kraft remains immersed in a far-reaching restructuring plan, and the general consensus seems to be that the company has plenty of work ahead of it after it emerges as a standalone firm at the end of March. The potential for the company to tie up with a rival adds a wrinkle to the Kraft story, but this possibility is merely speculative at this point, as any such move would likely come after the company had completed its restructuring.

At Altria, meanwhile, management remains focused on executing a smooth split from Kraft, but once it's official, we expect Altria to quickly turn to acquisitions, buybacks, and the eventual spin-off of Philip Morris International (PMI). We think the stock remains a good core holding. Altria Group is a Bull Market Report Recommended List Stock. It is up 111% since it was added.

No member of the Bull Market Report editorial staff contributing to this article has any long or short positions in any company mentioned. Indie Research has a disclosure policy.

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