Altria Group Spin-off of Kraft

Now that the legal litigation concerning the tobacco industry and specifically Altria Group, is winding down, Altria is finally planning on going ahead with its spin-off of Kraft Foods (KFT). In 2001 Altria made 16% of Kraft public in the second largest IPO ever, worth $8.7 billion. Now they plan to dump the rest of their 84% stake on the market worth about $43.5 billion. Kraft has already been seeing shrinking profit margins and a falling stock and selling the rest is sure to add more downward pressure. However, there is one redeeming quality for this stock in the long-run. Analysts estimate that after the sale it will have a market capitalization of roughly $57.14 billion, making it the largest company in the consumer food industry with more than 1/3 market share. As a result, it is not unlikely that Kraft would eventually be added to the S&P 500. What this means is that any mutual fund, ETF, or other investment vehicle which tracks the S&P 500 would for forced to purchase Kraft, causing the price to go up in the long-run.