Kraft Tells Suitor to Match $110-a-Share Price or Quit
The rhetoric meter shot even higher Tuesday as Kraft Chairman John Richman challenged his counterpart at Philip Morris to match Kraft’s $110-per-share restructuring plan or go away.
Meanwhile, Kraft’s stock price slipped $3 a share to $99 in active trading, reflecting Wall Street’s uncertainty about the real value of Kraft’s corporate overhaul.
Kraft offered its plan Sunday. It would give shareholders a combination of cash, high-yield securities, or “junk bonds,” and their existing Kraft stock as an alternative to Philip Morris’ hostile $90-a-share cash offer. Kraft rejected Philip Morris’ bid as inadequate and valued its package at $110 or more.
“Philip Morris does not understand what Kraft is doing--or, more likely, Philip Morris is pretending not to understand in order to increase its pressure tactics,” Richman said in a biting letter to Philip Morris Chairman Hamish Maxwell that noted, among other things, the tobacco firm’s unsuccessful attempt Monday to block Kraft’s restructuring in court.
“Obviously it is in your interest to try to pressure Kraft and the Kraft shareholders into a transaction that benefits you at their expense,” Maxwell said. “Kraft will not permit this.”
Philip Morris blasted the offer Monday, questioning nearly everything about it including the value of the securities and the value of Kraft’s stock after the revamping.
Philip Morris said it had “serious questions as to the feasibility of the plan and the real value ultimately to be delivered to shareholders.” The Kraft plan “will require breaking up the company and burdening what is left with an enormous debt load, mortgaging its future,” Maxwell said in a statement.
Kraft’s response Tuesday was every bit as caustic, signaling that neither firm will give up easily.
“Kraft was not ‘for sale’ and is not ‘for sale.’ There is no ‘auction’ of Kraft,” Richman said. “The Kraft Board is not taking action to ‘entrench’ itself. Just the opposite, it is proceeding expeditiously to provide Kraft shareholders with a choice between your inadequate $90 bid and a better than $110 recapitalization.”
In light of the staggering $20.3-billion bid for RJR Nabisco by investment firm Kohlberg Kravis Roberts & Co., Richman said the Kraft board recognizes that a better offer might yet be made for the Glenview, Ill., food company. Kraft will negotiate with anyone who presents a higher bid, he said.
But Wall Street appears to be less sure of the value of the deal.
Kraft’s stock was the most actively traded issue on the New York Stock Exchange, with 5.68 million shares sold. Philip Morris’ stock closed at $95.875, off $1.625.
