PM History/2 - Legacy Tobacco Documents Library

PM history/42A
, --NYT CASE STUDY front bus sect Sunday 10-23-88 : Grand Met's $5 .2 billion
lion bid for Pillsbury crowded out of top news by PM-Kraft deal + 3 days
later RJR tries to go private*******President of Campbell welcomes the
merger & says the two are so big already he can't see how it will make
any di££/i£ they keep the two separate managerially, then nothing will
have changed "And if they do try to combine them tomorrow, IT WOULD TAKE
THEM TWO YRS BEFORE THE EXECUTIVES COULD FIND THEIR NEW OFFICES"##*#use//
wh food industr consolidation is ood for the consumer : lessening of
compe i on oesn t drive up prices . . .m rs hrow their m3ctgodollars at instore
promos & price reductions -- & the bigger the co ., the more money it
has to throw vs . price reductions (i!!)//durinz Reagan admin ., antitruG+
lawc hava hsaen sub iected to a_ . SYS TEMATIC . PO7•ICY _. A . . . e way to
combat Japanese 3.s to build state-of-the-art factories & facilities that
~ can stand on their own ; mergers like Kraft-PM don't advance any of that//
~.) PM sees what's coming in Europe in '92 & is girding for it ; foo biz is
too overcrowded-2~_more restructurineneededp too many co .s do only what
Wall St wants -- allocate resources bearing in mind only short-term results
(RK : this is part of the answer to Joel Barth argument that PM overspent
to buy into food biz & could have used its money more wisely)//the
~ merged KGF has more clout & should be able to get•shelf space it wants &
~ needs, ossibl w o a in "SLO LLOWANCES" . co . will have some
Oo of t e ion foodbiz more produot i .nnovation & aggressive
mktg to be result of merger --KRAFT REJECTS PM BID, OF_FERS $14- BILLION DIVIDEND PLAN, NYT 10-24--88 :
top of pi, co5.s 4-5 w pic o£ Richman . . .deal would by_~£~ar the~.ar esty~.
~ restructuring ihistory . . .he says"'fie°~nea~'L~a~~ '~~i''4x~fit
CL. ma`-3e osre°a"~~-ractive o fer . . . "if they were o o ff~er a price tI at veflects
the full v u of Kraft" . . .ACTION FOLLOWED 5z HR SUNDAY MTG ON EMERGENCY
BASIS at a£t hq I442 expected to offer $20 .3 billion for RJR this same
morning, Monday) . . .the package explained . . .PM's all-cash b' s worse
tax consequences for Kraft holders since gain `a`1S"tacab~e14 in junk
bonds as part of estimated $110 a share package would cost Kraft $1 .5
billion in debt on top of current $1 .1 billion . . .to handSe uge new debt
j.oaca ic man concedes, ouid "RE UI BY OUR ED'II'L S"
but they'd have high incentive in stock options Richman says Kra£t's curren,
situation is "NOT OF OUR MAKING . Rather, it is the 12roduct of current era
investment volicies &-t'in attitudes that favor short-term i „c ;ai g,-a~ ;fi"
cat'ion over steady, long-term grow' =nee ~ .ng I1G-j/%PM & KRAFT CLASH OVER
O~'FE.TtS: NYT 10-25 88 a I-Iamish takes swi~e at the `fi4 u"-~i ili on dividend n_1an,
raiaing~"~iQ,t}~,, uestions abu~t^its fes.14 ~y" & "real value" . . .Kraft
s ac at~"I'SI s°""pging rem`ksOcall`s them "TOTALLY CONSISTENT
+W/PM'S PRESSURE TACTICS TO BUY KRAFT .OI~ .T~ C1,~.?.," adds it will not be
"~to~cY~ecide which is the better
offer . . .PM said K's offer might take months to firm up while its was on
the table now & raised question wheher it would keep it there for very
long . . .but Goldman of Paine Webber doubts after 18-month study PM is going
to abandon its quarry . . .Kra£t stocke-ml jumped $32 .50 previous week soared
~` another $10 yesterday to $100-
close at $102 . . .Wal1 St arbitragers put a$100-
103 value tag on Kraft package offer while PPd insiders & allies said it
was less than ~ . . .MOREOVER.~, PM PLAN WOUS,R, _JOMEP._,SCRAFT ~TOGETHERX Hamish
~ notes, while Kra£t ~Su~.a re u~e breaku of the co . 7~'Ur$ena.ng its
e $'f~~i~- -' .~ .,e mor ,ge,g.Lpg.,~~ture /KRAFT SE4.S TERMS FOR PM,
T'(J'=-8'i `~i~h rie"`gti`tid~=t2 a anytha .ng above $110 a share though PM bid of
$90 on table . . .but Hamish hold~ .k~.j,~ .,~,]7~2,"~c,'~„& Kra£t shares plunge $3 to close
}~ at $99 . . .Richmax~"'SEsti3~"~;5`ear ~Tamish" letter saying Kraft isn't for sale
but at $110+ it could be had . . .Wa11 St hears PM is working on a plan to
1 accommodate this pricetag//ANALYST5 PUT KRAFT PACKAGE UNDER HARD SCRUTINY
& the~~+_+~nh b.on5~ y~,~g,~hey 'd devalue b 1.~3, making the stock trade at abou-
I$1~65`~a-share -- THSS -BEl'~G"'~'rt'r77B""CE>l~1-fTED PM PACKAGE w/junk in it, but
PM people say it's "absolutely untrue" PM is contemplating new offer w/
junk in it . . .PM can borrow mone much chea er iv n' s//
despite Richman posture, many ana ysts doublt PN ma ing serious effort at
$110 a share ; suspicion is that if PM will do $105 right now, it's a go/
sus hat M we11 is la in a waitin --might play it longer
while Kra£t's stock price retreats urther KRAFT PLAN PARES MARGIN OF ~
ERROR, Market Place col . in NYT by Floyd Norris, 10-26-88 : Most leveraged ~
as well as largest recapitalization ever, thus fragile & risky . . packa~e ~
~bonds of ~t4 w%~~m .~+aown va~ iet beca;7~~" _y a'
are ~'orced osL„-holders" r.a£h_e,~~°~sQ~c( ~31~ b3""' ese
"il'f-`~erms of interes°t"i-Teingth not yet given . .& the remiander ~~i,~- o
age in £orm of THE STOCK or "stub" of what's ~e,~tmay noey 2 Kraft is ~
6Ia`lmn th . .':co . says debt level would
be 7a .i~.7..5,,Q.}1 or 9of 'L'E'l3"~VT
OULD HAVE A HUWHERE SHAREHOLDERS' EQUITY SHOULD BE, ° as of
yesterday it had book value o£ ~ust 55 .5 billion of which $900 million was
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