Jan. 31 (Bloomberg) -- Altria Group Inc., parent of the world's largest cigarette maker, will spin off Kraft Foods Inc. on March 30, saying the unit will grow more quickly as an independent company.

Investors will get 0.7 share of Kraft for each Altria share, New York-based Altria said today in a statement. Altria owns 89 percent of Kraft after selling a stake in the world's second-largest foodmaker in a 2001 initial share sale.

Once independent, Kraft will be able to increase debt and use its own shares to fund acquisitions, Altria said. Kraft, the maker of Oreo cookies and Cracker Barrel cheese, trails Kellogg Co. and General Mills Inc. in profit growth, and multibillion- dollar smokers' lawsuits against the cigarette industry have weighed on its shares.

``The spinoff will enhance the value of both companies by allowing them to focus on their own businesses,'' said Donald Yacktman, who manages Altria and Kraft shares among $1.1 billion in assets at Yacktman Asset Management in Austin, Texas. ``For Kraft, it's going to be easier to grow through acquisitions in the slow-growing food industry.''

Shares of Northfield, Illinois-based Kraft rose 26 cents to $34.92 at 4:01 p.m. in New York Stock Exchange composite trading. Through yesterday the stock has increased 13 percent since its public offering in June 2001, while Altria shares have climbed 79 percent. Altria fell 15 cents to $87.39 today.

Earnings Reports

Altria separately said fourth-quarter profit increased 29 percent to $2.96 billion, or $1.40 a share, on higher Marlboro cigarette prices and overseas sales. Revenue expanded 3.7 percent to $25.4 billion.

Kraft reported a 19 percent decline in fourth-quarter profit as sales dropped for the first time in 4 1/2 years. Net income declined to $624 million, or 38 cents a share. Sales fell 3 percent to $9.37 billion.

Altria Chief Executive Officer Louis Camilleri declined on a conference call with analysts to discuss the possibility of further restructuring of Altria, saying his focus is on the Kraft spinoff.

Separating the U.S. and international tobacco units may come in 2008, said investors such as Charles Norton, who oversees $75 million, including Altria shares, as portfolio manager of GNI Capital Inc.'s Vice Fund in Dallas.

Kraft also said Camilleri will step down as Kraft's chairman while remaining a director. Kraft CEO Irene Rosenfeld succeeds Camilleri as chairman.

Legal Victories

Altria's board decided last year to proceed with the restructuring after rulings in a U.S. Justice Department racketeering suit in Washington and two cases in Florida and Illinois went the company's way.

In November, a federal appeals court in New York allowed Altria's Philip Morris USA and other cigarette makers to appeal a judge's decision to let light-cigarette smokers seeking $200 billion in damages sue as a group. The decision delayed the case, which represents the biggest potential legal liability for the tobacco industry.

The ruling emboldened Altria to proceed with spinning off Kraft even as lawyers for the smokers considered trying to block the transaction, arguing the food assets may be needed to cover a potentially large award, investors said.

Camilleri told analysts today he has ``no idea'' whether lawyers in the light cigarettes case may seek an injunction.

``If I was on the other side, I don't think I would do it,'' Camilleri said. An injunction claim would have ``no merit,'' he said.

Considering Suit

Michael Hausfeld, a Washington lawyer who represents the nationwide group of light-cigarette smokers, said yesterday he's considering filing a suit to block Kraft's spinoff. He didn't immediately return a call seeking comment today.

Shares of Kraft had their best annual performance last year, rising 27 percent to outpace a 16 percent gain by Kellogg, the biggest U.S. cereal maker, and an increase of 10 percent by Switzerland's Nestle SA, the largest food company by revenue.

Prospects for the spinoff and the June hiring of Rosenfeld, a former Kraft executive who spent the previous three years running PepsiCo Inc.'s Frito-Lay unit, spurred shares last year, investors said.

Rosenfeld, who took charge in June, told analysts in November she plans to provide details of her strategy on Feb. 20. She is scheduled to speak at the Consumer Analyst Group of New York conference in Scottsdale, Arizona.

Kraft's shares will probably fall when Altria investors who receive shares subsequently sell them, analysts said.

``We expect shares to be weak through the first quarter and likely trade sideways subsequently,'' UBS Securities LLC analyst David Palmer in New York wrote in a note to investors. He rates Kraft as ``reduce.''

Kraft also said that Altria Chief Financial Officer Dinyar Devitre and Charles Wall, Altria's general counsel, will resign from the Kraft board.

To contact the reporter on this story: Chris Burritt in Greensboro, North Carolina at cburritt@bloomberg.net.

Last Updated: January 31, 2007 16:09 EST