Word: kraft
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...Kraft made a lot of its customers ecstatic last week, then made them furious. In the company's Ready to Roll contest in Chicago and Houston, readers matched game pieces in a newspaper ad with ones on specially marked packages of cheese. Only a few were supposed to match, but a printing error produced millions of potential winners. Worse, hundreds of people thought they had won the grand prize: a $17,000 Dodge Caravan. In response to customer complaints, the food giant offered a compromise: $250 in cash for winners of the van, lesser amounts for the other winners...
While the suitors struggled to come to terms, a sudden truce was called in another huge takeover fight when Kraft ('87 revenues: $10 billion) agreed to be acquired by Philip Morris ($28 billion). Hamish Maxwell, chairman of Philip Morris, said he will not have to sell off chunks of Kraft to finance the buyout. Said he: "For the vast majority of Kraft workers, this won't have any impact at all." The Philip Morris coup was an unusually smooth resolution. Another KKR fight fizzled last week when the Macmillan publishing firm accepted a $2.5 billion offer from British financier...
...illustrate further, remember that last week also saw the sale of another American household name and producer of consumer products, Kraft Inc., to Philip Morris Companies Inc. for an estimated $13.5 billion. Each year, Kraft sells $10 billion worth or products like Cheez Whiz, Miracle Whip and something called Frusen Gladje. Philip Morris makes items such as cigarettes, beer, coffee, lunchmeat and Jell...
...merit of domestic mergers is a matter of debate. Friendly unions of two firms may help the combined company compete against foreign rivals. Philip Morris, for example, hopes its purchase of Kraft will create a more formidable ) opponent to the West European consumer goods giants Nestle and Unilever. And because most industries now operate in a global marketplace, there is decreasing danger that mergers will stifle U.S. competition and raise consumer prices...
Risks arise, though, when takeovers force a company to assume excessive debt. The proposed buyout of RJR Nabisco, for example, could load the company with enough debt to make it vulnerable to rising interest rates and a recession. Since Philip Morris will borrow about $9 billion to buy Kraft, its obligations too could become uncomfortable. The tobacco conglomerate is confident, however, that its cigarette business will generate enough cash to pay off its debts...