Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, June 21, 1994 TAG: 9406280004
SECTION: BUSINESS PAGE: C-8 EDITION: METRO
SOURCE: Associated Press
DATELINE: NEW YORK LENGTH: Medium
Securities analysts said the elevation of two executives, both smokers whose careers began in the tobacco ranks, to replace him may enable the world's biggest cigarette company to make a more convincing case on Wall Street.
Investors seemed to take in stride Sunday's surprise announcement that Miles had resigned as chairman and chief executive. On the New York Stock Exchange, Philip Morris rose 371/2 cents a share to $50.75.
Miles was replaced as chairman by R. William Murray, named only last month as vice chairman in charge of the foods business, and as chief executive by Geoffrey Bible, who was vice chairman in charge of tobacco.
Miles had been in charge for nearly three years during which the maker of Marlboros led the industry into a profit-sapping war of price cuts and the company's share price sagged under a withering assault from lawmakers and anti-smoking activists who advocated tighter controls and higher taxes on cigarettes.
In addition, Miles was seen as advocating separation of the Richmond-based tobacco business from the food business, which includes brands such as Oscar Mayer meats, Jell-O desserts and Maxwell House coffee. The theory was that two companies would be valued more highly in the stock market than one is.
But the Philip Morris board decided at a marathon meeting May 25 to take no action on the separation and didn't expect the issue would rise again in the foreseeable future.
``The door got slammed on him on the breakup of the company and it probably frustrated him,'' said John Maxwell, tobacco analyst for Wheat First Butcher Singer in Richmond.
``The breakup is a dead issue,'' said analyst Gary Black of Sanford C. Bernstein & Co.
Miles has failed to respond to repeated requests for comment on the issue of separating the companies and was unavailable Monday to discuss why he resigned. In Sunday's statement he said with U.S. tobacco's recent resurgence, it made sense to have ``a career Philip Morris executive in the top job.''
The new leaders are still expected to do something to boost the company's market value. Philip Morris' stock has sunk about 30 percent from its $68-a-share price when Miles' selection as chairman and CEO was announced in late March 1991. He actually took over five months later.
Miles had been head of Kraft Inc. when Philip Morris acquired it in 1988. He was the first non-tobacco executive to head the 144-year-old company and had quit smoking 20 years earlier.
He was faulted for not being a more effective champion of the tobacco business. Black said he expects Bible and Murray will better communicate to Wall Street why investors should set a higher market value on the tobacco operations at Philip Morris.
He said the company's profits will be strong from domestic tobacco this year after last year's hefty decline due to price wars. He said the proposed increases in excise taxes on tobacco will likely be lower than first feared.
Black also said new management should be able to argue more persuasively than Miles did that recent threats of tobacco litigation ``are nothing new.''
``This could give the stock the kick start it needs,'' Black said.
by CNB