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Loews Lets Lorillard Go 

Loews said goodbye to hundreds of millions of dollars of annual dividends after cutting loose its tobacco subsidiary Lorillard on Monday. But Lorillard is not alone as the other top tobacco companies look for ways to expand outside of the world of cigarettes, and investors seemed pleased with its decision.

Loews, a conglomerate that operates offshore drilling rigs, along with Bulova watches, hotels and an insurance company, announced it was spinning off Lorillard. . . .

Now that Lorillard will be independent it will be able to make acquisitions of its own, although it may leave it open as a takeover target.

Getting rid of Lorrilard entirely is a double-edged sword for Loews. While it might attract more shareholders to the remaining operations, the tobacco unit was profitable. It provided Loews with 21.5% of its sales and 33.2% of its income last year, according to Revere Research.

"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 wrote in a report after the deal was announced. But Moody's said that the spinoff would not impact the $900 million in rated debt Loews currently owes. The agency affirmed Loews' A3 rating, highlighting its view that the conglomerate will benefit from the elimination of its exposure to tobacco litigation.

After the spin-off, Lorillard's headquarters will remain in Greensboro, N.C., and Martin Orlowsky will remain as chairman.

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