PM History/2 - Legacy Tobacco Documents Library

PM history/44
{ MATERIALIZED, leaving Kraft little choice but to accept sweetened PM
offer//BUT : some anal sts believe PM is paying dearl . ."IT'S'SIMPL
~ FAR TOO MUCH sez Davi Go1 man es oc o ana ys hard to
us ify anything over $100 as true value, but diversification move should
certainly help perf . by GF, but Goldman maint th BETTER CO .S
TO BE HAD AT LOWER PRICES, citing ara ee Corp, Gerber Products &@ua er
Oats . . .o er va .ew : urchase will somewhat slow PM earnings growth a yr
or two but by '90 it will really energize the profit pic//Iv TO DE~ :
little overlap bet two foo 'ts + they share the distributi .on networ
for many products + unlike GF . MZft has broad-based streneth abroa$
& w/competition expected to inerease w end of trade barrierG in SC by
'92, essential for PM to have more muscle in that mktplace + Maxwell
candidly concedes Tood will improve PM's ren w/investors, concerned about
lawsuits & the future or ` cig Fiz T_g .etting WSDELY ~PFC D MANAGERENT,
Miles in~,articular//BACKGROUND : SHO~~D 73'1`"`TAX2I`1TIER
MOV~CAIT~'E"'I~'~ ~"JY~AMISH HAD SAT TOGETHER AT A TRADE ASSN MTG IN DC ONLY
FEW DAYS EARLIER & hadn't iven an hint of hiis lans'tt'**'M"""*'M''Kraft
had ex~lored a11 op ti41a~ ~,tment o,w~~#.~ ~M . even
consic~3.er"`~e~.""YCTfiADKSCVU`yPBi AS "A MERCHANT O$°"'YSh"AVff' in attempt to capitalize
on ant s g sen imen . . .the Kra£ reca i i tion San caused a lot of
concern because of its hu e , irectors & opera ions peop e worried,
s e of ma~or pieces o aft loomed, but Richman said there was ~,Q,,,,~ga~Ge
but to undergo maior chanpes
if Kraftwas to remain indep~n ~
, d,
qnt,. . .w
,~,a ~'b"1To~d W~as'"tiigYi stakes n"offer ame &`-~hough'"TSM°~iad~"'t~'rom start indicated
it was o-oen to da.scusslon of erms'it didn't budge because it feJ+ *+c
other suitor_ was emerging & because re~a on sc eme asn't
e w investors . .. OW : delav of a-S=5-" ti3h1ion
unk bo
issue y Federated Dept Stores, acquired earlier in yr by Campeaorp
3ghly leveraged transaction . . .PM felt it was in driver's seat but
toyed w/other strategies, EVEN OFFERING FOR RJR'S FOOD OPERATIONS//Kra£t
directors met Sunday at Wachtel Lit ton's NYC offices & as HamE'faxwell~
le t- s-- ar vearoun pm to sa .gn the agreement, co advisers &
~e ecutives gathered round & gave him round of applause*#*'"~
11 h 88 A t' Al OPPOS ITION TO MZRGER see A dvocacy Ins titute - c ion er
t ,
!
~ combining nation s#1 and 22 a~dve~rti ~Y• PM ov~~,-~ok,,P&G as world's
.SE
__ liers
~ ' largest adver i£ ser -in ,' 7 w . .,] ,~~illion ou`~ayjthe proUieril~:" Lf ~8Y Ri onal
aYit3`t~u's`E`concerns =-'concentratiolz"'o~"~Y'ea .t "~co . & pol . powerful in a
handful of corp . mgrs + history of tob . co .s` usi their clout "to
subvert blic education & ublic heal .ini ~.atzves o con ro the
a v promo of s . .PM can now in~ure e th of employees of Kraft
& of consumers "BY THREATEN2NG TO WITHHOLD POPUyAR BRAND NAME RIERCHAN-
D7BE FROM RETAILERS who conduct consumer ed programs that include S&H
1 ed ., who prohibit smkg on retail premises, who choose not to sell cigs
~ q.,r WHO REFUSE TO ACCEPT PT-OF-PURCHASE cie adv & promo + presenting
-~hr~eat, e,~ress or 3 .mplied . o£ massjvo ~ec~ nf ady rQys_ to an .v 'r'y natwOro1L
or B'Gat1on o?` publ'e_.at l o__ "that (;_H_OO S_OO.SES TO REPORT __GL:__-_? YV-ELY ON
SPrKG'S HAZARDS, that supports smkg control legislation, or that . . .reports
on the lobbying & other practices of PM" . . .noting, too, how this echoes
Sarokin holding that jury could find existence of "a tobacco industry
conspiracy, vast in its scope, devious in its purpose & DEVASTATING IN
2TS RESULTS"///NYT editorial Smoke .Io :.ta a Ma -M rger," 11-i$-88 :
~ There was a time in pre-antiregulation DC when such a merger would
have sparked great opposition but not now, but non-consumer considerations
here are important because the more PM "enlarges its economic base,
~he more }, .t v~ ;li enlarge its already substantial power to influen~e
puI3cg ohcv on smke . . .~'Ie zen'~ baum askig ~~condition 3.ts approval
on I-vi pledge use its muscle to curtail the public debate on tob .
use & NYT hails this as worthy goal : PM "to pledge such restraint voluntarily"
. . . pondering whether PM via merged co "would wield its increased
~ power as a lobbyist, employer, purchaser of supplies & advertiser to
protect the mkt for cigs"#*####citing RJR's petulant behasior fir3 ng
co rci 1 ou PM tr o~ i'nflence internal ~
olicies of its s ; those w o se i jars, ce ophane ~
I
Ior ea insurance . . wi it use new Kraft adv bucks to discourage
mags & press from printing material critical of tobacco?/PM could short-~
cir+Tuit the controversy by pledging to keep hands off internal smkg po1-CD
icies of its food divisions & to keep tob politics out of its adv deci- C=)
sions . "If Kraft is really worth $11 billion, surely it is worth such
a demonstration of good will" . . .//PM ANSWERS, letter to NYT signed Geo
Knox, staff vp-public affairs : citing corr . bet . HMax & Richman on these
issues, no o£ trvin_~_, to a .1ter s~kg -oo~ icies Kraft has adopted
but PriT reserves the riga~t to express its view on smkg pola .cies adopted by
orgs or businesses, esp . when more extreme than law or convention demand ;
its media buying decisions made solely on basis of mktg objectives &
are "unaffected by the editorial oolicies & Tpractices of any medium or
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