Philip Morris could raise up to $9.5 billion in Kraft IPO

Thursday, May 3rd 2001, 12:00 am
By: News On 6

NEW YORK (AP) _ Philip Morris Cos. Inc. indicated it could raise as much as $9.5 billion from its planned sale of stock in its Kraft Foods division, making it one of the biggest initial public offerings in the United States.

The IPO could help the company pay down some of the $11 billion in debt it acquired when it bought Kraft last year.

Kraft Foods is the nation's biggest food company, including Oscar Mayer meats, Maxwell House coffee, Kraft and Velveeta cheese, Ritz crackers and Oreo cookies.

Philip Morris, which also owns the biggest tobacco company and the top-selling cigarette brand Marlboro, said it plans to sell 280 million Class A shares of Kraft stock for between $26 and $31 a share before July 1.

According to a filing with the Securities and Exchange Commission, the number of shares being sold could rise by 28 million shares if demand is strong enough. The prices per share cited in the filing are estimates and could be raised or lowered before the sale.

But those numbers indicate Philip Morris could raise between $7.3 billion and $9.5 billion in the sale. The biggest IPO to date in the United States was last spring's $10 billion-plus offering of stock in AT&T Wireless.

Philip Morris has been planning the Kraft offering since last summer when it announced it was buying cookie and cracker maker Nabisco Holdings Corp. for what eventually amounted to $15.2 billion.

In its filing on Wednesday, Philip Morris said it would keep 275 million Class A shares and all 1.18 billion of the Class B shares in Kraft after the offering.

That indicates that Kraft shareholders would own about 16 percent of the 1.7 billion total Kraft shares.

But Philip Morris would control 97.7 percent of the voting rights in Kraft because the Class B shares carry 10 votes each while the Class A shares have one vote each.

The filing indicates that Philip Morris expects there will be strong interest in Kraft despite the recent stock market slump that has driven some companies to call off planned IPOs.

Philip Morris said it expects the offering to be completed by the end of the second quarter of 2001.

Food industry analysts say the Kraft Foods business is well-run and comprises a very profitable collection of popular food brands.

The company said Kraft stock would be traded on the New York Stock Exchange and said it had applied to use the KFT symbol.

The combined Kraft Foods and Nabisco operation had sales of $34.7 billion in 2000 which made it the nation's biggest food company and second worldwide only to Nestle SA of Switzerland.

Kraft brands also include Post cereals, Jell-O desserts, Kool-Aid drinks, Chips Ahoy cookies, Planters nuts and Life Savers candy.