PM History/2 - Legacy Tobacco Documents Library

PM history/43
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--KRAFT SOLD TO PM FOR $13 .1 BILLION, NYT 10-31-88 : $106 a share is
,~ final price, agreed to over wee kend, which is $9 .50 higher ian closig
i ~i' pr~.c'e Fx~i-2E $4O•875 higher than price before offer was made 10/17 . . .
% g ,
~ e
~_ _~t^"
sez Richmane "Our shareholders are receiving full value, & this merger
is ~HE BEST POSSIBLE OUTCOME for our employees, customers, & the communities
in w icT we operate"*##*#he remains Kra,F PM vice
chairman while MMi.les~q '-'~ ~t
reporting to Richman~at corp level .• .Kraft HQ to remain at Glenview SLL//
K's directors had refused PM offer & proposed instead to give stockhjol-
~ ders ~complex P that it valued at $110 a share composed
~ of $8 1n1g yield bonds known as junk bonds & would
have kept their shares, which K said would be worth $12 a share, so the
three=$110 . . .price went up to $102 7/8 last Tues, ending at $102, up
$10 for the day, & Wall St thoug k}~~'t .3~', W
;qre, BUT INSTEAD
OF CONTINUING TO ~"ATTA~D ~~AS'L1~&'REAL VALUE" OF
IfftAFT OFFER . . . Richmond fought back, saying Kraft will not be pressured"
& termed HM's remarks "totally consistent w/PM's pressure tactics to buy
Kraft on the cheap" . ..as HM ~av~ ;y,, 1 .o
, h~n . -P what kxis nelctt ste would i,~,~, no price inerease" see3n°e$~
~n cards
ll JJ & traders seeme$'d ear~enec7 a arba.tr o 1' that M was
tr a.n stock down" . .,hints that if Kraft kept resisting,
PM mlght k loo t elsewhere k' . d . .s d oc Jumpe 11 t two $ o ars 6 o 0 9•5 F on id r ay
on hope weekend would produce movement . . .Wasserstein, PM's chief fin .
advisor, phoned Kraft's counterpart, Willard J . Overlock, while chief '
lawyer for each firm made contact, PM indicated it was prepared to make
an offer AT LEAST AS GOOD AS KRAFT'S PROPOSED PACKAGE, no numbers mentioned
but both sides secure enough for HM to order his private plane to
wing to O'Hare Airport for motel mtg w/Richman at L~* ton's suite in the
Westin O'Hare Hotel . . .two d ,~'or 3 hrsq
and aware that sharp vJ2S`~'ds had be"g5xri to fly ; 4'3L~i re~dssured the ot~er
that what they had said was necessitated by need to protect his co . &
ergo they should "start fresh" w/no animosit or re e en . . .talks said
to be "very relaYd" & the two got a ong very we 1 specif c negotiations
began around lOpm w~.~,~~~p~3.gg ,.~re & JR saying $106 would be
more like it & w/each 5O" per sfiare-amounting to $62 million, they inched
up : $104 .50 but Racluman eld ; HM comes up 91 to 105•50 -- BUT JR HELD OUT
& by 1am HMax smiled broadly, stuck out his hand & yie7,~7.e4~
no changes in ad agencies anticipated since they
I others . . .Kraft hqd £ ..4 . Q ~plovees m ~ & PM 113 .000•• .HM talking savings
via elimina$Xon o u ica~~.ve un tions . . .e ectation Richman will be
around another 4yrs till PM retirement at 65/asked at end if he had,Luy7
other takeover 1ans H112 aid "No this is enou h£or this "///SIDEBAR,
"A Muscular onsumer G t" : will musc e e pu o effectzve use . . .some
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obvious & immediate help, e .g., Kraft cheese products can be sent to
stor as PM's Oscar e ra . erated meats . . .PM to try
to imbue Kraft w/more aggressive mktg style . . . manue Go dman= real economies
will emerge once they get to size up each other but pt is there's
money to do whatever is needed .• .Miles has dpne some restrix,,~., shedding
nonfood units & adding promi~~3"f1~'`§"5 .i'$~'`d~tE`~"o`'ti e~ frozen
foods .• .Iv[rLES ASSTrnrtFn T .TKELY TO HOLD HIGHER POST AT PM EVENTUALLY//retailers
have become ever more power 'u
Id6iz because mfrs
on limited store shelv
, esp when lntroduc new produc_-Fs-+
IZED SCANNERSONCRECIMUfi LINES make it much gasier for store mars
to monitor what's selling & to ;ettison those that don't & supermkts gaiin
~
further s-~rng-Gn thru conso i ation, so the KGF powerhouse may rectifv
the b c som what###########but smaller competitors could be first to
feel the pressure /HUGE PM REVS AID KRAFT DEAL : Goldman answers whether
PM can afford the purchase w/"Do bears sleern in the woods?" . . .PM has
excess cash f1ow ~^Q ofabout
~2~]~i~,11on a Vr, twice what Exxon generates,
meana.ne they can ~av o
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expenditures are set aside/ 4 ba 'ne I
0\
tri • .cost of borrowed capital to be
on avg somewhat above 9l for 1i£e of the loan which exn~res
"not a very high interes'*t rate, says anny Gol man B `"E~~Gt7TIVES e ~
R_.~a~. ~~' :eW. , ,~s~ . . : ,+~.,~,g~l dep t' became general pN
counsel a,n "Y76 .~ rs~'1'~Mi9.es y
vfas ~'`r"'`V}' Ky Fried, then vp ',p
& gen mgr of RJR's grocery products group ; Wm Murray, Aussie from New 'o
South Wales, ~~a.d of Svdnev Te_chnica College, did UN relief agency work
stationed in elrut headed budget division at 2ntlLaborOr in Geneva
joined PM in '70t Murphy, Columbia la.w school grad in '54J STORYI ON
~UEiA " dIS4e Kraft had strenuously resisted w/recapitalization it
valueZc at 11O a share but it contained junk bonds & wasn't greeted warmly
by either Kraft shareholders or Wall St arbi-bragers -- & 110 OTfIER BSLDER
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