Kraft Foods - Philip Morris Companies

Currently, Kraft Foods is one of the biggest makers of confectionery, food and beverage products in the world with over 11 globally reputed brands earning in excess of $1 billion annually. Since its beginning in 1923, it has witnessed unparalleled growth in the U.S. Kraft Foods, as it is currently known, was formed in 1924 following the renaming of the National Dairy Products Corporation. Since then, the main objective of the company has been to grow continuously through meticulously planned acquisitions. However, the tale of this high-profile US IPO begins with the acquisition of the company by Philip Morris Companies Inc.

Philip Morris Companies, one of the largest tobacco companies of the world, acquired Kraft Foods in 1988 in what an attempt to expand its hold in the food industry. The General Foods unit of Philip Morris Companies had been merged with Kraft Foods by 1989. However, in early 2001, in an attempt to raise capital to clear debts incurred during the acquisition of Nabisco Holdings, the company decided to go public with Kraft in the form of an Initial Public Offering. Moreover, the adverse reactions of public to the conglomerate that sold both cigarettes and dairy products had compelled Philip Morris to gradually move away from Kraft and the IPO was the first step towards achieving this. The IPO was filed with the Securities and Exchange Commission and was underwritten by bigwigs such as J. P. Morgan Securities Inc., HSBC Securities Inc., Morgan Stanley etc. However, at a time when companies hesitated to offer IPOs, Kraft Foods managed to generate remarkable interest in the market.


In order to retain the control over Kraft Foods, Philips Morris Companies offered a partial IPO. The public was sold approximately 280 million Class A shares while the company retained 1.18 billion class B shares. Since every B share was equal to about 10 Class A shares, the company still ended up controlling about 98% of Kraft Foods. While the stocks were initially offered at $31.00 apiece, by the end of the first day, it had gained $0.25 with the trading reaching up to $31.25. The shares amounted to about $8.7 billion making this one of the largest IPO offerings in the country's history. Currently, despite not being controlled by Altria Group Inc. (present-day Philip Morris Companies), Kraft Foods continues to be strong in the market. Its performance in the stock market continues to be steady in spite of the economic crises in the recent years.

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