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Altria

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shareholders were breathing easier Wednesday after the Illinois Supreme Court agreed to hear the direct appeal of a $10 billion verdict against it in a false-advertising lawsuit and set a reduced bond requirement.

On Tuesday, the court reinstated an earlier order for the company to post a $6.8 billion bond while it appeals a class-action case alleging it misled smokers about the health risks of "light" cigarettes. The company was originally asked to pay $12 billion, but said that amount would force it into bankruptcy.

Meanwhile, the court reversed an earlier judgment not to hear a direct appeal of the case. "This decision will allow Philip Morris' appeal to proceed in a timely and efficient manner," said William Ohlemeyer, Philip Morris USA vice president and associate general counsel, in a statement.

Analysts applauded the news, calling it "great relief," "a knockout victory," and "as good as it gets."

"The ruling is arguably one of the most favorable and important legal developments in the last decade," said David Adelman, an analyst at Morgan Stanley, in a research note. The key implications, he said, are the elimination of the bonding threat and the acceleration of a resolution -- likely by 2004.

Adelman also said there is now potential for "an earlier increase in Altria's credit rating, a quicker restart of share repurchases, an acceleration of a potential spinoff of Altria's 84.1%

Kraft

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stake, the elimination of having to make a leave-behind payment -- which could encourage additional legal attacks, and a far reduced likelihood that

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lights case will proceed to trial."

Philip Morris' litigation woes had been the biggest overhang on its stock, which was down for the year ahead of the decision. By contrast, the

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is up 13.2%.

Altria shares were lately up $4.57, or 11%, at $45.03. "Our sum-of-the-parts analysis shows that the company should be valued close to $60 a year from now," said Judy Hong, an analyst at Goldman Sachs, in a research note. "We see an increased likelihood that happens over the next six to 12 months as market participants become more convinced that key remaining lawsuits could be put to rest in that time frame."

Hong expects a decision in the lights case to come out around the summer of next year.

"Investors should be thrilled -- in our view -- that Philip Morris gets to avoid the Fifth District Court of Appeals," said Rob Campagnino, an analyst at Prudential, in a research note. "We do not believe that this court would have represented a favorable venue for the tobacco industry."

Campagnino said he is optimistic the Illinois Supreme Court will rule in favor of Altria on the merits of the case, "decertifying it and relegating it to the scrap heap of history."

On the downside, Campagnino sees ongoing risks for Atria investors as "deterioration of the premium sector, continued pricing pressure from excise taxes and increased litigation."

With 90% of its volume in premium cigarettes, Philip Morris continues to face competition from discount brands, as customers seek cheaper alternatives.