Philip Morris to acquire Nabisco food operation

Published on .

Philip Morris Cos. agreed to acquire Nabisco Holdings, the food operation of Nabisco Group Holdings, for $55 a share, adding the company's snack, candy and condiment brands to its own Kraft Foods unit to create a food behemoth with worldwide revenue of $34.9 billion. Less than 20% of the newly merged company, expected to be combined by October, will be sold in an initial public offering in early 2001. R.J. Reynolds Tobacco Co. agreed to purchase Nabisco Group Holdings for $30 per share.

The merger of the major food giants is intended to further leverage the scale of Kraft Foods, which with the addition of Nabisco brands such as Oreo, Ritz and Planters will build its share of the growing snack category from 6% to 20%, said Geoffrey Bible, chairman-CEO of Philip Morris. Although the integration of the two companies is intended to cut costs by more than $400 million in 2002, those savings will come from operations such as procurement and manufacturing, while the stated intention to combine the now distinct brand portfolios through line extensions, cross-merchandising and promotions will likely bring a bump in marketing.

Kraft, currently reviewing both the way it compensates its ad agencies and its media agency roster, spent $759 million on measured media in 1999, per Competitive Media Reporting. Its agencies include FCB Worldwide, J. Walter Thompson USA and Leo Burnett USA in Chicago and Y&R Advertising and Ogilvy & Mather in New York. Nabisco, which spent $187 million on media in 1999, splits its agency work between JWT, Chicago; FCB, New York; and North Castle Partners Advertising, Stamford, Conn.

Copyright June 2000, Crain Communications Inc.

Most Popular
In this article: