Poised for a groundbreaking IPO in mid-June, analysts believe that Kraft Foods was the subject of some unprecedented “pre-marketing” by its underwriters, who are jointly led by Credit Suisse First Boston and Salomon Smith Barney.
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Philip Morris Cos, the Northfield, Illinois, parent of Kraft, apparently told underwriters to approach potential investors with a multi-page survey in order to gather opinions and responses to the IPO. This should allow Philip Morris to set a benchmark value for the company.
No specific price range for the IPO was detailed in the 16 March filing of the initial Securities and Exchange Commission registration statement (S-1), but additional amendments made on the 2 May and then the 11 May did offer a range from US$26 to US$31 and US$27 to US$30 respectively.
At this price, the Kraft deal is worth at least US$7.6bn, and is set to become the second-largest IPO in US history. The largest, by the AT&T Wireless Group in April last year, was pre-marketed in a similar fashion, according to investors who point out that the system is unusual in the US.
“Normally what happens is that the bankers work with a company to decide what a valuation should be,” explained Linda Killian, fund manager of Renaissance Capital’s IPO Plus Fund. “In the case of Kraft […] the underwriters really solicited opinions on what the pricing should be.”
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