Philip Morris Companies Inc., which owns Kraft Foods, announced Sunday that it has reached an agreement to purchase Nabisco Holdings Corp., the nation’s No. 1 cookie and cracker maker, for $14.9 billion plus the assumption of $4 billion in debt.
Philip Morris, headquartered in New York, is the world’s largest tobacco company with its Marlboro, Benson & Hedges and Parliament brands.
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Its Kraft Foods subsidiary oversees marketing of its cheese products as well as such brands as Jell-O, Maxwell House, Oscar Mayer and Post cereals. The purchase fills a gap in its food portfolio, which had not included cookies and crackers.
The announcement of the sale at $55 a share ended a bidding war that had involved financier Carl Icahn as well as a venture of France’s Danone SA and Britain’s Cadbury Schweppes PLC.
The Danone-Cadbury offer reportedly was for about $50 a share. Danone, a leading manufacturer of cookies and crackers, had hope for an American foothold with the deal, while Cadbury was more interested in Nabisco’s candy holdings.
Nabisco Holdings, which makes Ritz crackers, Oreo cookies and Life Savers candy, is 80.6 percent owned by Nabisco Group of Parsippany, N.J.
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By GlobalDataNabisco Group issued a separate statement confirming the sale.
Nabisco Group also said Sunday that after shedding the Nabisco Holdings unit, what remained of the group — essentially it’s cash from the Nabisco sale — would be sold to R.J. Reynolds Tobacco. Ironically, R.J. Reynolds Tobacco had been a subsidiary of the group — previously known as RJR Nabisco — before it was spun off last year as a separate publicly traded entity.
Nabisco Group said the price for that deal was $9.8 billion, or $30 a share.
James M. Kilts, president and chief executive of Nabisco, said the transactions would fulfill management’s pledge of last May to maximize its value to shareholders.
Philip Morris chairman and chief executive Geoffrey C. Bible said in a statement that the purchase will greatly expand the company’s food offerings.
“The combination of Kraft and Nabisco will create the most dynamic company in the food industry, both in terms of absolute earnings levels and revenue and earnings growth rates.”
Kraft and Nabisco together produced revenue of $34.9 billion last year, Philip Morris said. The combined company is expected to be second in the world only to Nestle of Switzerland, which has annual sales in excess of $35 billion.
Philip Morris also revealed that after the transaction is completed in October, it will begin work on an initial public offering of 20 percent of the stock in the newly combined food company.
It said the IPO was expected in early 2001, with proceeds used to retire some of the debt incurred in the Nabisco purchase.
The deal, it said, will add 18 brands to its existing 55 brands.
Nabisco’s brands include Oreo and Chips Ahoy! cookies; Ritz and SnackWells crackers; Grey Poupon mustards, and Life Savers.
Icahn, the biggest individual shareholder in Nabisco Group at 9.6 percent, disclosed last Thursday in a federal filing that he had offered $28 a share for the whole company, or $8.3 billion. That bid consisted of $19 in cash and a two-year note with a face value of $9 for each share.
He was seeking control of the entire group, including its Nabisco stake.
According to a filing later Thursday with the Securities and Exchange Commission, Icahn disclosed that he had informed Nabisco he could offer as much as $31 a share by boosting the face amount of the two-year note to $12. He said he could raise the extra money by arranging to “pre-sell portions of the business of Nabisco” to other potential buyers.
Icahn, who had made three failed efforts to replace the Nabisco Group board over the past few years, goaded the board to put Nabisco Group on the market when he suggested in late March that he wanted to increase his stake in the company to 40 percent through a $13-a-share offer.
On April 3, the Nabisco Group board said it had authorized management to explore the sale of the company or its stake in Nabisco Holdings.
