Dart & Kraft to Split in Bid to Boost Food Operations
Dart & Kraft, the food industry giant formed by a merger six years ago, said Thursday that it plans to separate into two companies to enhance the market value of its Kraft foods operations.
The larger company will be known as Kraft Inc. and will consist of the company’s food businesses and its fast-growing Duracell battery operations. The other company, as yet unnamed, will contain Dart & Kraft’s problem businesses, including its troubled Tupperware unit.
Barry M. Ziegler, a food industry analyst with Tucker, Anthony & R. L. Day in New York, said the split “accomplishes for Kraft the disposition of Tupperware.” Other analysts, however, said that Tupperware seemed poised for a turnaround and that it and the other divisions of the unnamed company might be better off once they do not have to compete with Kraft for corporate resources and attention.
Dart & Kraft said that Kraft, the nation’s largest cheese maker, will have $8 billion in sales and assets valued at $3.2 billion after the split. The unnamed company will have sales of $2 billion and assets of $1.3 billion.
Tupperware, which makes plastic food containers, would provide 40% of the sales and half of the income for the smaller company, estimated John Bierbusse, a food industry analyst with Duff & Phelps in Chicago.
Dart & Kraft reported 1985 earnings of $466.1 million on sales of $9.9 billion.
Dart & Kraft said that if the board of directors gives final approval, it will create the new companies through a share distribution. Dart & Kraft shareholders will be given shares in the smaller company, while their present Dart & Kraft shares will represent ownership of Kraft Inc., the maker of Parkay margarine, Breakstone yogurt and Sealtest, Breyers and Frusen-Gladje ice creams.
Dart & Kraft said it has not placed a value on the new shares. Dart & Kraft shares have been trading recently in the $55 to $57 range but were actively traded Thursday on the New York Stock Exchange and closed at $60.37 1/2, up $3.25.
However, Ziegler, the Tucker, Anthony analyst, said he expects one share in each of the two new companies to be worth a combined total of $68 to $70.
Dart & Kraft said its chairman and chief executive, John M. Richman, will become chairman and chief executive of Kraft Inc. Dart & Kraft’s president and chief operating officer, Warren L. Bates, will become chairman and chief executive of the new, unnamed company.
Analysts said Dart & Kraft executives have been frustrated by the languid performance of most of the company’s non-food businesses, which masked to some degree the solid performance by the Kraft foods unit.
Merged With Kraft in 1980
“It was certainly frustrating for Kraft to produce 70% of the earnings and not receive 70% of the attention” from an investment community that focused on “the decline at Tupperware and its other consumer businesses,” Bierbusse said.
When Dart Industries merged with Kraft in 1980, it was thought that Dart’s rapidly growing Tupperware business would complement Kraft, a profitable but slow-growing food products business. Shortly after the merger, however, Tupperware entered a decline as more and more women entered the work force and had less time for Tupperware parties, the in-home gatherings at which Tupperware products are sold.
Additionally, the company had trouble attracting women to join the Tupperware sales force as more young women opted for full-time careers.
During the last six years, Dart & Kraft has sold off a number of money-losing Dart Industries units but has acquired Hobart, a maker of food service equipment, so that the new company is somewhat different from the old Dart Industries. Most recently, the company sold its KitchenAid appliance business to Whirlpool.
Analysts said, however, that the Tupperware business, which has introduced new product lines and has intensified its marketing program, seems to be on the verge of a recovery.