Loews ( LTR) has decided to spin off its cigarette-making subsidiary.

The New York-based conglomerate on Monday said most shares of that unit -- called Lorillard -- will go to current holders of Carolina Group ( CG), a class of Loews stock established in 2002 essentially to track Lorillard's performance. Thereafter, Lorillard will become its own publicly traded company.

Lorillard makes and sells cigarettes under such brands as Newport and Kent. Apart from tobacco, Loews also deals in such varying businesses as casualty insurance, oil-and-gas drilling, hotels and wristwatches.

Loews holders don't need to consent to the deal. Provided that regulators approve, Carolina holders will get around 62% of Lorillard shares in a one-for-one stock swap. That, says Loews, represents the economic interest that Carolina stock has in the Carolina Group entity.

The remaining Lorillard shares will be offered for exchange with Loews shares, should market conditions be deemed "acceptable." If not, or if the offer isn't fully subscribed, those shares will be distributed to Loews holders as a pro rata dividend.

The transaction will be tax free, assuming the IRS concurs on that point, and should complete in mid-2008. In addition, Lorillard headquarters will remain in Greensboro, N.C., and the company will retain Chairman and CEO Martin Orlowsky.

Loews shares were lately adding $1.27, or 2.7%, to $48.07.

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