NEW YORK - The future of the US tobacco industry came into sharper focus yesterday when Loews Corp. said it would spin off its Lorillard cigarette subsidiary, positioning the maker of the Newport, Kent, and True brands to compete with rivals who are aggressively looking to replace cigarettes as a source of revenue.
As Americans buy fewer cigarettes, tobacco companies have started to look for alternatives such as cigars, chewing tobacco, and snus, which are tea bag-like tobacco pouches placed between the cheek and gum and are popular in parts of Europe. An independent Lorillard could take on debt to pursue acquisitions or develop such alternatives on its own.
That could remove some legal risk and boost the market value of New York-based Loews, which is led by the Tisch family. It also owns Loews Hotels, Bulova Corp., CNA Financial Corp., and Diamond Offshore Drilling Inc.
Altria Group Inc., the parent company of the nation's largest cigarette maker, plans to announce on Jan. 30 the exact timing of when it will split Philip Morris USA and Switzerland-based Philip Morris International, creating two separate publicly traded tobacco companies.
Philip Morris USA completed its purchase of cigar maker John Middleton Inc. last week, and started market tests of Marlboro-branded snus in the Dallas-Fort Worth area and Marlboro-branded chewing tobacco in Atlanta earlier this year.
Reynolds American Inc. bought smokeless tobacco company Conwood Co. in May 2006 and has seen strong results from the Grizzly-brand moist-snuff. R.J. Reynolds Tobacco Co., which is Reynolds American's largest subsidiary, is also conducting market tests on a Camel-branded snus product.
Lorillard will soon begin test marketing its own snus, under the brand name Triumph. The test product is part of a joint venture formed in October 2006 with Swedish Match North America Inc. to develop smokeless tobacco products.
After the spinoff, expected by mid-2008, Lorillard's headquarters will remain in Greensboro, N.C., and Martin Orlowsky will remain as president, chairman, and chief executive of the tobacco business.
In June, Loews agreed to pay $4.03 billion for Dominion Resources Inc.'s natural gas operations.