PM History/2 - Legacy Tobacco Documents Library

More documents

Recommendations

Info

PM history/45 publication as they may concern policies or social issues the opti.mal move "for all concerned"//But that's the £irst round of reaction . . .the ~nd a~kc wti,a . is h,- ohn on a& Co . can't do now at RJR_ $h~ the '1 the bu out by wa o~ econom &- . . . ." --ARE PM & RJR PUTTING STOCKHOLDERS FIRST?, BW 11-7-88z Within a week, the two co .s chose diametricall o osed cou of ctio . . .at first Wall St went w/RJ° a s oc rooped 5 7/ reflecting view that the acquisition didn't represent shareholder enhancement, whereas RJR stock rocketed 21 3/8 to 774, then another 7g when KKR got into it . . . RJR's said to be "the re£erred a roach" by a former chief economist for t e SMC sr„t s ri~ht to ~out the monev immediately_into shareholders' ands -- WHEREAS PM SHAREHOLDERS WILL HAVE TO WAIT A PAYOF since big acquisitions, to judge by history, aren't likely to generate efficiencies & innovation, notes Harvard's economist ROBT REICHz "It will just create a layer of bureaucracy & further concentrate the food processing industry" . . .Hard for RJR shareholders to be upset w/deal tha_t makes them 60°% richer overni~h_t vs . PM's strategy raises question if i .t's ?~szv b-ne-e,+G -F,~r„r, a~ -1 „ be snread among shareholders urithin cur . .in short, RJohnson hasn't exp n~ h~ wan s to take co . -crivate "though it's hard to believe personal profit isn T a i'6 g part of the answer"//both co s(1) COULD MAKE BIGGER ~ PAYMENTS TO SHARFHO'r•DF.RS since core biz is declining & doesn't require muc additional capital investment . . .each sez it's naving out enouah at 1t69 of EPS, yet those are ower ro ortion t bein aid b BiTM '`~, AT&T Me,-c>r w~M-~-#-~#*### 2 BOTH COULD HAVE BOUGHT BACK , more aggressively than they've one o a et Reich says under capitalis system, "if you make a lot of money, yr shareholders should share in that directly, rather than indirectly thru a takeover or an LBO"*****but then you've killed the goose that laid the golden egg, sez RK//this step viewed as unfashionable in the Age of the Megadeal -- or "PERHAPS IT'S BECAUSE PAYING OUT HIGHER DIVIDENDS OR BUYING BACK STOCK WON'T ECE ~ STATUS OF MANAGEMENT . With a big takeover behind him, ~Iaxwell wzll presi e over a larger co . w/more clout and -- most likely -- more pay . And Johnson will get his payout more directly -- in cold cash -- & probably more quickly"///WHO WINS IN THE HUGEST DEALS? Fortune 11-21-88 on same subjectz Kraft d said it would s end $14 billion to ' 's billion a eove M A~R .rrz t,ad faced IDENTICAL PROBLEM : they couldn't get public to bid up the price of their stock to the levels normally accorded companies as lushly profitable as theirs*******the buy-back programs didn't have much effect in this regard//exces H 011 here defined as monev left over- _aft-er taxes . capital spen idends & interes ts tob . co .s hat can reinves muc ~ -! he soT _o f some usinesses a R ~ to a~o~od co . .~ & w/Zitigation problems i- n- tob . on wane & "smokeless" cig ready for mkt, RJR in better shape on cash flow than in a long while . . .LBO DEFINEDz : to bu a co, w/borrowed funds often using the co .'s assets as collateral ; a oes o in e w i e-ora.neina usu ~oai y se ix off nieces of the one,-a t, on, ,,' THE OPE ATIN - AC . l .~ _-_ _=0R"G FROM MAKING THE EXISTING MANAGEMENT INTO OWNER-MGRS," & pressure to generate cash flow means the ~iz mus e made o operate more ef£icientlv, & it usually is, albeit w ayof£s & other orms of cos~tta.ng, the owners hope eventually to make big profits, sometimes by selling the biz back to the public . . . BUTz during the transitional period of paying off the buyout, the concrete of equity has been replaced by the paperboard of debt, & "A HOUSE MAY NOT LAST THRU THE NEXT STORM"#*~###//ONE SURE LOSER : THE FED GOV as tax i wa. droo to z ro for both co-T"'ich paid a£t 20 milion in '87 . .,ALSO, LBO HURTS CAPITAL INVFS T- ~ P~NT since mone is needed to meet debt so e flciency of US in us y nega ive y a f ec ed "FOR HAREHOLDERS ONE THING IS CLEAR : You would have been better off to own RJR than Philip Morris," & if you had u invested the same amt in both shares 10 yrs ago, Johnson's move has suddenly made yr stake in RJR worth nearly 4-0% more than yr piece of PM + in RJR bu out shareholders WILL CASH OUT & then can make their own decis ons about abeut diversifvinF t eir ris s w ereas HARE- H DERS WILL TILL HAVE HAMISH Pd1AYGTELL DOING IT FOR THEM" (RK : exactly -- & they probably can't find any better investment T e becom ~ n c1 s ey in their bas ic b ss !IANY SECURITY ~ AN G ' RAT N "It's the wearing of~e ~ purple" -- as in i erial -- sez V1m Frankenho 0 om ine Capital ~ Management, inves~~irm, "It's strictly A DEFENSIVE MOVE & NOT TO -P THE BENEFIT OF THE SHAREHOLDERS . Kraft has good quality earnings, BUT ~ SO DO TREASURY BILIS" .L .even at the original offering price, PM will p earn only about 8% on its money BEFORE INTEREST & TAXES, so not wise investment//RJR HAD TV~LC) BIG PROffi n Johnson came 'nz it had diversi .£~c in o consumer ro uc s but w o a coherent strate~v . so Ross_s answers http://legacy.library.ucsf.edu/tid/fmw44c00/pdf
PM history/46 --PM, MOVING SWIFThY, UNVESL .S PLAN TO MELD KRAFT & GF, WSJ 7,- 2 ~1-89 . c uisition rice now uo t billion . . .now creating by 3/1 the Kraft Genera Foods Group, a $20 billior h, to c 'st of p s - arate o eratin units/all thi`9`~j+ `M3.ehael 2i.1es, WHO IN RECE UTAS RUMORBD TO BE A ADING CANDIDATE FOR CEO POST AT RJR NABISCO/PM said to have dr ed its feet w/GF "& doesn't want to make the same mis e -Lzvice . . . uc cr sov r bet Kraf o 1e in these new assignments,not just s icking w what ey ow or did -- some surprise in this . . . David Goldman speculates (of Fahnestock & Co .) is "testing the mktg mettle of various people"//the :onsensus : PM wanted synergies from the meld & Kraft management, so not surprising that in the reorganization & combination, "Kraft is coming out on top" --PM & ROTIiMANS SET U_ .K . C2G PACT WSJ 4-21-89? PM has 24 .9% voting stake in'Ro zm~Et- ans, tFiis broadens the a .e, rlnging total to 14% mkt share/ viewed as much needed step to survive in increasingly difficult Brit . mkt dominated by AB's Gallaher Ltd w/1-1-1% of mkt & Britain's Imperial Group PLC w/38%•••PM's two brands are imported Marlboro & British-made Raffles ; Rothmans brands are R King size, Dunhill & Peter Stuyvesant --PM BEGINS TESTING 'NICOTINE-FREE' CIG, WSJ 5-31-89s PM has quietly begun preliminary -testing o£ a vzrtualiy nacotine-free cig that it says will have all the taste & flavor of a standard cig . . .PM claims this innovation is not being done bv filter or naper technoloav but h .y GF techno- ~ ogy -- by "use the co . s Gen -- Foods for USA subs the iary " decaffein- ation of coffee/nic is removed beforehand so cig has standard filter// said to be othin lake remier, RJR's ill-fated "smokeless" -- " h~is ~~ a real cig w no devices or funn business -- which burns, tastes & sme s like a cig . . HAVE .o n . Test-mktg under two names - Free & Next 3rom Merit e .£ , . t~~ w'~ .12 4ws. P a reT~"a7~seen '"ag ~ a~'~ to, the he]. ,~c y~/MERST SS BES - 'C,IS ~".img for ar oro "PM is betting a its r wi h e the same a ea1 as deca£f in te off e or s ar-free soda" RON DAVISOF ~s ew cx shouldn t be considered sa e a a " s nce "if it contains tob at t ~~it will sti r'o Oduce the thousands of chemicals that are in the tar includin t that are known to cau r "//Observers think PM wise o . go on the offensive & 2 to ine-extend w~Merit as less risky w ~ for the i.X, ~tro, ~ . . xp a n ~he , pròdif8't•s ,, easier to focus " on "havi4~` e - ` ' "' ti~ ` w`n consumer confidence in a whole new brand##a'u'*#***a,*###'x'##*'u'bv stressir thQ TL7.C- M moy S ., Y8 . ._ .c S o SG Koo~p/miÌC~ 1'oe-c-cei• approac~anJR"s~effort ~~o~acremier as free-standing brand// while skeptical of reception, observers feel new brand may win over some "who want -t,o ~fg,g~T~a~,tbe-Xar~~ ~~.ng ~ather than being in t'Fìe°-t'Yirbes°"o`~ ~~ an addic ;ibri ""+`may7.ure mo';i'e rietv~mis~ers & discourage some existing smkrs from kicking the habit#*##***so good mktg conceptx'z~DENIC NEXT G~~ETTI~N~ _-p,~'~IEDTBY PM JUST LIKE D~WSS Adv column by Alix Freedman 8-~~'8~ : PM bettin~"""tHSa"'NE7C'G'Yw"i'Y°f`~do for ciES what Sanlca did for cof- T__, ill car~-v ;~ e , yrp, ~d.,n;IIe.-~'1t~ „ ',benlogo . . .brands ads ., vroclaim Introducin~ de-nicotined to`'~i .~~w7rich flavor" & adds that the removal or n2c is ••natura.i .•• . . .tie .1ng -teszed in Totee.o, umana & nar-crorcy/ Al Ries chairman of Trout & Ries notes the simple analogy, linking cup of coffee w/having a smoke . . .MOREOVER, THE CAFFEINE COMPAR3HON EN TO IMPLY IT HA5 A SAFER CSG W/O ACTU ASSERTING IT trving to repeat itsintro of Merit in the '70s . . .also._trving to_keeA the message sh & sweet_ & thus avoid RJR's mist the clever contraptiori""tiià'.t' DEh2VEREDNI06TINE--SLTT-NO TAR (RKs Premier then was just opposite of Next in what it took out)//some industry critics feel the word "denicotined° should draw FTC censure . . .,N,~t ~,3~,~.s,. ..,Same nias Carlton but si i£ieantl~ ., ~hi~lae .r: 1ci,Ve,7s of tar//some cjr.ies zon the 'ad~dpy s~ress on :~"e Z3'X~ice as subTiminT rebuttal to the addiction issue . . .some ads state the brand "offers a choice they have never klad before" & "The Next choice is yours" but a competitor exec says if you're smoker & are offeredice, a cho' you may choose to quit altogether . . .PM is in dis & . 6 .'n ne. b d do b in d + ~" P -F--'...i79~,cfsr : *~*#*big 5 1 d bucks under promo sez a Cam r e Light smkr : Carltons & Now are like %1O sucking air while "These Nexts have a flavor & that's what a smkr wants" aN ($K : what about the nic hit?)///ADVOCACY-INSTITUTE ACTION ALERT 8-21-89 : `l `~ . s-tern producing .iA~i ~ne jn lsales,co.s "new' products ' to imp ly -P safer smkg . , .wh distinwi shes .,,1Ye,4t,,is_. ' harxher,Wtar ievels of 4-10mg, ~ `loser to resu.lar b_ . FYI carez~Jy y avoids call att . to ' azads o'i"- v nic . '6u~ ~ e~ Next as a .* new "choice" for smokers . . .stressin th C0 "natural rocess" of nic r & trying to link smkg nic-free w coffee/w cou e a p .r . success unless smkg control advocates get to work ; PM spokesman Andrew White sez product is attempt "to respond to customers' http://legacy.library.ucsf.edu/tid/fmw44c00/pdf
Page 1 and 2:
PHILIP MORRIS HISTORY VIA CLIPS & D
Page 3 and 4: PM history/3 OVERALL PM SALES DROPP
Page 5 and 6: PM history/5 "Come to where the fla
Page 7 and 8: PBfI history/6A --INFLUENCE OF HYGR
Page 9 and 10: PM history/8 of war, geatly overest
Page 11 and 12: PM history/10 I Camel to PM) . . .b
Page 13 and 14: PM history/12 --CIG EXPORTS RISE SH
Page 15 and 16: I PM history/13 --MORE THAN SMOKE,
Page 17 and 18: PM history/15 INVESTORS HAVE GRABBE
Page 19 and 20: 15 INSERT (cont .) of chemical comp
Page 21 and 22: I PM history/17 ' had to build mktg
Page 23 and 24: PM history/18 INSERi LETTER FROM PM
Page 25 and 26: I A>, I PM-history/20 for the passi
Page 27 and 28: PM history/22 --WHITNEY AT PHILIP M
Page 29 and 30: pm/z4 tl- ' remaining dependent on
Page 31 and 32: pm/26 PM tries to sell at upper end
Page 33 and 34: I I i PM hnm*oJ~y/28 --BEYOND MARLB
Page 35 and 36: PM history/30 pr9.ce . . .twice a y
Page 37 and 38: I PM history/32 in '30 Ellis & MeKi
Page 39 and 40: PM history/}4 --POTPOURRI FROM "THE
Page 41 and 42: PM history/36 --PM, EEOC SETTLE CIV
Page 43 and 44: PM history/38 PM OFFICIAL LINEz we
Page 45 and 46: PM history/40 Wal1 St thinks PM PAI
Page 47 and 48: PM history/4-1 chooses, but key pt
Page 49 and 50: PM history/42A , --NYT CASE STUDY f
Page 51 and 52: PM history/43 I --KRAFT SOLD TO PM
Page 53: PM history 44 INSERT ' --FORBES JAN
Page 57 and 58: PM history/48 --CLASSIC PM & INDUST
Page 59 and 60: PM history/50 million 2 c ai b O1 i
Page 61 and 62: I I r PM history/52 -OPPONENTS AIM
Page 63 and 64: I I PM history/54 ~ Cote d'Or~rom_u
Page 65 and 66: PM history/56 in '87-'89 crisis . .
Page 67 and 68: PM history/58 co . that looked like
Page 69 and 70: PM history/60 his office figured ou
Page 71 and 72: PM history/62 I of '88 was launchin
Page 73 and 74: PM history/64 ' cern by #1 food co
show all

PM History/2 - Legacy Tobacco Documents Library

Create successful ePaper yourself

Delete template?

Save as template?