Altria Group, the world’s biggest cigarette company, announced plans yesterday for a $146 billion (£72.4 billion) break-up of the group, with the separation of Philip Morris International (PMI), its non-US tobacco business, from Philip Morris USA.

The decision by the board of Altria, the New York-based owner of Marlboro, comes after the spin-off of its Kraft Foods subsidiary in March and is designed to liberate the company’s expanding cigarette businesses in Asia and Eastern Europe from its struggling domestic unit, which has been bogged down by falling demand from American consumers and by costly litigation.

The decision will allow the Geneva-based PMI greater flexibility to make acquisitions and to roll out new products in developing markets such as Indonesia and Russia. It generated $48 billion in net revenues last year, roughly two thirds of Altria’s profits.

The new international business is expected to have an enterprise value of about $90 billion and will be led by Louis Camilleri, the chairman and chief executive of Altria.

Philip Morris USA, which controls 51 per cent of the American cigarette market and contributed $18 billion in sales last year, is expected to focus on trimming costs, dealing with a tightening regulatory environment in the United States and the introduction of smokeless tobacco products such as “snus”.

Mr Camilleri will be replaced as chief executive of Altria – which will remain as a holding company for Philip Morris USA and its 29 per cent shareholding in SABMiller, the brewer – by Michael Szymanczyk, the chairman and chief executive of Philip Morris USA.

The decision to break up Altria into its remaining constituent parts follows a long-running campaign from investors. They are keen to benefit from continued growth in cigarette sales in some developing countries while insulating themselves from the industry’s problems closer to home.

Andrew Darke, an analyst for Evolution Securities, said: “The two businesses have different dynamics. PM USA is a cash-generating machine but with very limited growth opportunities, while PMI is defending its position versus foreign competitors like JTI and Imperial Tobacco and also pursuing acquisition and growth opportunities.” He added that the break-up would raise questions about Altria’s continued stake in SABMiller: “They might sell it off and use it to buy back shares in Philip Morris USA.”

Altria’s recent spin-off of Kraft Foods, the world’s second-biggest food company, was also designed to unlock greater shareholder value.

Altria said that a final date for the separation of PMI would be announced on January 30 after final scrutiny of the decision from the board and following the completion of other regulatory and tax hurdles.

The spin-off also comes amid mounting expectations that the US Food and Drug Administration may take direct control of the regulation of the tobacco industry in the United States, a step that investors fear would further undermine its profitability.

Mr Camilleri said: “Today’s announcement underscores our sustained and determined commitment to create enduring long-term shareholder value. I am convinced that this transaction will enhance growth at both Altria and Philip Morris International.” Mr Camilleri first told investors in 2004 that Altria was considering splitting up the group after lower profits from its Kraft subsidiary undermined earnings.

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