Loews Monday said it plans to spin off its cigarette unit, Lorillard, which makes Newport, Kent and Maverick cigarettes.
The spin-off would be accomplished by swapping shares of its Carolina Group tracking stock -- shares of Loews designed to track the performance of the cigarette assets -- for new common shares in a separate Lorillard company.
Loews -- whose businesses include financial, energy, hotel and watch-making companies -- is a New York-based conglomerate run by the billionaire Tisch family.
Holders of its Carolina Group stock would receive one share of common stock of Lorillard for each share of stock they own, and would hold about 62 percent of Lorillard.
The remaining 38 percent of Lorillard's stock could be exchanged for shares of Loew's common stock if the company believes market conditions are acceptable for the exchange.
The Lorillard spin-off is expected to be completed in mid-2008 and its stock would trade on the New York Stock Exchange, Loews said.
Its Lorillard tobacco unit saw a record $233.6 million in earnings during the third-quarter.
The company said Martin Orlowsky, will continue as chairman, president and CEO of Lorillard.
Moody's Investor Service, meanwhile, affirmed its long-term debt rating on Loews following the announcement.
"Even though the spin-off would eliminate the overhang of tobacco litigation, dividends from Lorillard still represent the majority of cash flow to Loews and a highly stable source of earnings and cash flow," Moody's vice president Janice Hofferber said, adding the spin-off is expected to be neutral to the company's credit profile.