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BREAKFAST WITH THE FOOL
Kraft Crafts IPO Plans

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By Dave Marino-Nachison (TMF Braden)
March 19, 2001

Philip Morris (NYSE: MO) Friday filed, as expected, to sell shares of its Kraft Foods subsidiary in a massive initial public offering (IPO). Though the company did not say how many shares it plans to sell or when exactly the offer would take place, it expects to raise as much as $5 billion.

Kraft, the world's number-two food company after Nestle based on last year's sales, is expected to trade on the New York Stock Exchange under the symbol "KFT." Shoppers in the U.S., where the company is tops in food sales, will easily recognize many if not all of the company's billion-dollar (or more) brands:

Brand (type)             2000 Sales*
-----------------------------------
Kraft (cheese, toppings)      $4.30
Nabisco (cookie & cracker)    $3.55
Oscar Mayer (meat)            $1.37
Post (cereal)                 $1.35
Maxwell House (coffee)        $1.11
Philadelphia (cream cheese)   $1.07
Jacobs (coffee - Europe)      $1.04
*$billions 
Source: Kraft S-1 filing

The company owns a number of other well-known domestic brands, including Tang powdered drinks, Planters nuts, and Lunchables ready-to-eat meals. All told, adjusted for last year's Nabisco Holdings operation -- which was one of the primary drivers of the IPO plans -- the company can boast nearly $35 billion in 2000 revenues, and almost $4.6 billion in operating profits. (For more on investing in consumer brands, check out our InDepth page on the subject.)

Given the status of the economy and the stock market, which has soured many investors on unstable high-growth stocks, it's likely there will be some interest in Kraft and its strong brand portfolio, product development expertise, and global reach. The company also considers its management a strength, though several top Nabisco executives have left for jobs at companies such as Hershey (NYSE: HSY) and Gillette (NYSE: G) this year.

Kraft plans to use the proceeds of its IPO to pay off debt, much of which was taken on to buy Nabisco. The company expects that deal to lead to additional expenses as it considers closing or selling several Nabisco facilities, which would create millions of dollars' worth of add-on costs.

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Check out Friday's Foolish market wrap-up with just one click.

Kraft's new low-fat macaroni and cheese isn't bad, says Dave Marino-Nachison, whose stock holdings can be viewed online, as can the Fool's disclosure policy.

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