CPC to Buy Kraft Bakeries for $865 Million : Acquisitions: Deal would make firm the largest U.S. producer of premium baked goods.
CPC International Inc., the maker of Hellman’s mayonnaise and Skippy peanut butter, said Monday that it has agreed to buy the nationwide baking business of Kraft Foods Inc. for $865 million.
The purchase from Kraft, a subsidiary of Philip Morris Cos., includes brands such as Entenmann’s baked products, Oroweat breads and Boboli pizza crusts. The businesses being purchased have $1.2 billion in annual sales.
Englewood Cliffs-based CPC said it will combine the Kraft businesses and its Best Foods Baking Group, which markets products such as Thomas’ English muffins; Arnold, Brownberry and Bran’ola breads, and Sahara pita bread.
With the acquisition, CPC’s sales of specialty baking products would total about $1.7 billion, making the company the largest producer of fresh premium bakery products in the United States, it said.
“The addition of the these leading brands--Entenmann’s, Freihofer’s, Oroweat and Boboli--is an excellent deal for CPC’s shareholders,” CPC Chairman C.R. Shoemate said in a statement.
The acquisition would add to CPC’s earnings and increase overall company revenue to about $8.6 billion in 1995, Shoemate said in an interview. Through additional acquisitions and growth, CPC should reach annual revenue of about $10 billion by 1996, he said.
Additional benefits would come from combining each unit’s distribution networks, a vital link with the market for fresh baked goods.
Mark Schroeder, chief investment officer at First International Management, said the news was not a surprise. “I had been expecting the sale and had heard it was priced at up to $1 billion--between $700 million and $1 billion--so this is in the ballpark.”
Schroeder said Philip Morris was seeking to sell off its lower-margin businesses to focus on higher-margin and international business.
The businesses of New York-based Philip Morris include cigarettes, Miller beer and Oscar Mayer foods.
CPC said the largest market of the businesses to be acquired is the Northeast, but that other significant markets are the Midwest, Southeast and West. The operations include 16 bakeries, an apple-processing facility and a research and development facility. The business employs about 9,000 people.
CPC’s Best Foods Baking Group operates seven plants and employs about 2,000 people. Among CPC’s other big products are Mazola corn oil and margarine, Karo syrup and Knorr soups and sauces. CPC is one of the nation’s largest corn refiners.
CPC stock fell 37.5 cents to $62.25 on the New York Stock Exchange; Philip Morris rose 50 cents to $74.50. The announcement was made after the close of trading.