-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KL+jbGKoYb2wQKjRMcbF3ler0lgHcLH7po9A5MmaUVLEglaufWL+tcF/5bgGMZ4H or/dWDbWmugyfULZPRVkgg== /in/edgar/work/20000626/0000950130-00-003538/0000950130-00-003538.txt : 20000920 0000950130-00-003538.hdr.sgml : 20000920 ACCESSION NUMBER: 0000950130-00-003538 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000625 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000626 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PHILIP MORRIS COMPANIES INC CENTRAL INDEX KEY: 0000764180 STANDARD INDUSTRIAL CLASSIFICATION: [2000 ] IRS NUMBER: 133260245 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-08940 FILM NUMBER: 660993 BUSINESS ADDRESS: STREET 1: 120 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 9176635000 MAIL ADDRESS: STREET 1: 120 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10017 8-K 1 0001.txt FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) June 25, 2000 ------------- PHILIP MORRIS COMPANIES INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Virginia 1-8940 13-3260245 - -------------------------------------------------------------------------------- (State or other (Commission (IRS Employer jurisdiction File Number) Identification No.) of incorporation) 120 Park Avenue, New York, New York 10017-5592 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (917) 663-5000 -------------- - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) Item 5. Other Events. - ------ ------------ On June 25, 2000, Philip Morris Companies Inc. issued the following press release: Contact: Nicholas M. Rolli Christopher P. Kircher (917) 663-2144 FOR IMMEDIATE RELEASE - --------------------- PHILIP MORRIS ACQUIRES NABISCO FOR $55.00 PER SHARE IN CASH ----------------------------------------------------------- AND PLANS FOR IPO OF KRAFT -------------------------- New York - June 25, 2000 - Philip Morris Companies Inc. (NYSE: MO) today announced that it entered into definitive agreements with Nabisco Group Holdings (NYSE: NGH) and Nabisco Holdings Corp. (NYSE: NA) to acquire all outstanding shares of Nabisco Holdings Corp. for $55.00 per share in cash. The transaction reflects an enterprise value of $18.9 billion, which includes the assumption of approximately $4.0 billion in net debt. Philip Morris expects the transaction to be immediately accretive to its cash earnings per share and accretive to reported earnings per share as of 2002. The transaction is expected to be completed by October 2000. As part of the acquisition, Nabisco will be combined with Kraft Foods, Inc. (Kraft), the operating food company of Philip Morris Companies Inc. Following the combination, Kraft plans to undertake an initial public offering (IPO) for less than 20% of the newly combined company. The IPO proceeds will be used to retire a portion of the debt incurred as a result of the acquisition of Nabisco. It is expected that the IPO of Kraft will be completed in early 2001. Geoffrey C. Bible, chairman and chief executive officer, Philip Morris Companies Inc. said, "The acquisition of Nabisco coupled with our plans for an IPO of what will be the world's most profitable food company is truly compelling from a strategic, financial and shareholder value perspective. The combination of Kraft and Nabisco will create the most dynamic company in the food industry both in terms of absolute earnings levels and revenue and earnings growth rates. The IPO will underscore the value of our tremendous food assets and will preserve our flexibility and financial wherewithal to enhance Philip Morris' shareholder value. We firmly intend to continue rewarding our shareholders with our share repurchase and dividend programs." The combination of Philip Morris Companies Inc. and Nabisco would have resulted in 1999 pro forma underlying revenues and operating companies income of $86.6 billion and $16.3 billion, respectively. The transaction will create the world's most profitable food company. Kraft, together with Nabisco, would have resulted in 1999 pro forma worldwide underlying revenues and operating companies income of $34.9 billion and $5.5 billion, respectively, reflecting a pro forma increase in Kraft's operating companies income of 25%. With this transaction Kraft will: . become the world's most profitable food company; . accelerate its revenue and earnings growth rates by materially strengthening its presence in the fast growing and dynamic snack foods category; . become the world leader in cookies and crackers with a 13% share, and the leader in the U.S. cookie and cracker categories, with shares of 35% and 47%, respectively; . enhance its scale and add a successful direct store delivery system to its infrastructure to more effectively meet the needs of its global trade partners; . increase its brand leadership by adding 18 brands to its existing 55 brands that each generate more than $100 million in revenue; over 90% of Nabisco's U.S. portfolio of brands are number one in the categories in which Nabisco operates; . double its scale in Latin America and strengthen its presence in Asia and in Europe. Philip Morris anticipates that the combination of Kraft and Nabisco will yield annual cost savings of over $400 million in 2002 growing to approximately $600 million by 2003. Kraft has a successful track record in achieving productivity savings and will use its extensive expertise and enhanced scale to reduce Nabisco's costs to world class levels primarily across the procurement, manufacturing, general administrative and sales functions. In addition, Kraft projects significant revenue synergies resulting from the combination of the two brand portfolios. "This acquisition will add such household names as Oreo and Chips Ahoy! cookies, Ritz crackers, Planters nuts and Life Savers candy, to name a few, to our stellar portfolio of brands. We are confident that the integration of Kraft and Nabisco will be smooth, rapid and successful. We share similar cultures and over the years Kraft's management team has excelled at integrating acquisitions," Mr. Bible said. The acquisition will be financed initially through a combination of short-term debt and bank borrowings. The transaction is subject to approval by the shareholders of Nabisco Group Holdings and requires customary regulatory approvals. "We are confident that our shareholders, employees, suppliers and customers will share our enthusiasm for this transaction. The IPO of Kraft adds an exciting opportunity for both Philip Morris and Kraft. It will provide significant benefits and arms us with a potential currency to further enhance shareholder value in the future. The acquisition of Nabisco will generate attractive returns and will increase our earnings growth rates in the future," Mr. Bible said. Chase Securities, Credit Suisse First Boston and Wasserstein Perella & Co. acted as financial advisors to Philip Morris, and Wachtell, Lipton, Rosen & Katz and Hunton & Williams acted as legal counsel. With 1999 operating revenues of more than $78 billion, the Philip Morris family of companies is the world's largest producer and marketer of consumer packaged goods. Philip Morris Companies Inc. has five principal operating companies: Kraft Foods, Inc. (comprising Kraft Foods North America and Kraft Foods International), Miller Brewing Company, Philip Morris International Inc., Philip Morris Incorporated (PM USA) and Philip Morris Capital Corporation. For more information about Philip Morris Companies Inc. and its operating companies, please visit the following Web sites: www.philipmorris.com, -------------------- www.kraftfoods.com, www.kraftinternational.com, www.millerbrewing.com, - ------------------ -------------------------- --------------------- www.pmintl.com, www.philipmorrisusa.com. - -------------- ----------------------- Note to editors: Philip Morris Companies Inc. will host a press conference at 10:00 a.m. EDT on Monday, June 26, 2000 at Cipriani, 110 E. 42nd St. (bet. Park and Lexington Avenues), New York, NY. You may also access this press conference via a live Webcast by visiting the Philip Morris Companies Web site at: www.philipmorris.com. -------------------- Forward-Looking and Cautionary Statements - ----------------------------------------- All statements included in this press release that are not purely historical are "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Investors should be aware of the following important factors that could cause actual results and outcomes to differ materially from those contained in such forward-looking statements. Nabisco and each of the Company's consumer products businesses are subject to intense competition, changes in consumer preferences, the effects of changing prices for their raw materials, local economic conditions and currency movements. Kraft's results are dependent upon its continued ability to promote brand equity successfully, to anticipate and respond to new consumer trends, to develop new markets and to broaden brand portfolios in order to compete effectively with lower priced products in a consolidating environment at the retail and manufacturing levels, to improve productivity and to achieve the synergies anticipated from the Nabisco acquisition. Moreover, the Company's tobacco subsidiaries continue to be subject to increasing marketing and regulatory restrictions, excise tax increases, declining consumption, litigation and bonding risks, including risks associated with adverse jury and judicial determinations, courts reaching conclusions at variance with the Company's understanding of applicable law, and the absence of adequate appellate remedies to get timely relief from any of the foregoing. Developments in any of these areas, many of which are more fully described in the Company's most recent annual and quarterly reports filed with the SEC, could cause actual results and outcomes to differ materially from those contained in the forward-looking statements in this release. The Company cautions that the foregoing list of important factors is not exclusive. The Company does not undertake to update any forward-looking statement made in this press release to reflect any change in management's expectations with regard thereto or any change in events, conditions, assumptions or circumstances on which such statements are based. * * * * * * * * * * * * * * * * * * * * * * * * * * * This press release is not an offer to sell, nor the solicitation of an offer to buy, any securities. Any offer will be made only by means of a prospectus that will be registered with the Securities and Exchange Commission. ****** Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. - ------ ------------------------------------------------------------------ (c) Exhibits. --------- Number Exhibit ------ ------- 99.1 Press Conference Presentation Materials 99.2 Remarks of Geoffrey C. Bible, Chairman and Chief Executive Officer, Philip Morris Companies Inc. 2 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. PHILIP MORRIS COMPANIES INC. Date: June 26, 2000 By: /s/ LOUIS C. CAMILLERI ---------------------- Louis C. Camilleri Senior Vice President and Chief Financial Officer 3 EXHIBIT INDEX Exhibit No. Description - ---------- ----------- 99.1 Press Conference Presentation Materials 99.2 Remarks of Geoffrey C. Bible, Chairman and Chief Executive Officer, Philip Morris Companies Inc. EX-99.1 2 0002.txt PRESS CONFERENCE PRESENTATION MATERIALS EXHIBIT 99.1 - ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== Nabisco Acquisition . Acquire all outstanding shares for Philip Morris Companies Inc. $55 per share in cash - ------------------------------------------ ------------------------------------------ - ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== Nabisco Acquisition Initial Public Offering . Acquire all outstanding shares for . Less than 20% of the newly combined $55 per share in cash. company, formed through the merger of Kraft and Nabisco . Enterprise value of $18.9 billion, . Targeted for completion in early including the assumption of 2001 approximately $4.0 billion in net debt - ------------------------------------------ ------------------------------------------ - ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== Acquisition Rationale Acquisition Rationale . Kraft was ready to absorb a . Kraft was ready to absorb a sizeable sizeable acquisition acquisition - Portfolio actions - Emphasis on Productivity and innovation - ------------------------------------------ ------------------------------------------
- ------------------------------------------------------- -------------------------------------------------------- [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ======================================================= ======================================================== Acquisition Rationale Acquisition Rationale . Kraft was ready to absorb a sizeable acquisition . Kraft was ready to absorb a sizeable acquisition - Portfolio actions - Portfolio actions - Emphasis on productivity and innovation - Emphasis on productivity and innovation - Caliber and depth of our world-class - Caliber and depth of our world-class management team management team - Operating income margins - Operating income margins . Kraft is undeniably the most efficient food company in the world - ------------------------------------------------------- -------------------------------------------------------- [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ======================================================= ======================================================== Acquisition Strategy Acquisition Strategy . Disciplined approach . Disciplined approach . Yield attractive returns - ------------------------------------------------------- -------------------------------------------------------- - ------------------------------------------------------- -------------------------------------------------------- [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ======================================================= ======================================================== Acquisition Strategy Acquisition Strategy . Disciplined approach . Disciplined approach . Yield attractive returns . Yield attractive returns . Provide strong brands in leadership . Provide strong brands in leadership positions positions . Fuel earnings growth rates . Rapidly accretive to cash earnings - ------------------------------------------------------- --------------------------------------------------------
- ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== Acquisition Strategy Acquisition Strategy . Disciplined approach . Disciplined approach . Yield attractive returns . Yield attractive returns . Provide strong brands in leadership . Provide strong brands in leadership positions positions . Fuel earnings growth rates . Fuel earnings growth rates . Rapidly accretive to cash earnings . Rapidly accretive to cash earnings . Low risk of integration . Low risk of integration . Maintain credit ratings - ------------------------------------------ ------------------------------------------ - ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== Acquisition Strategy Scale Advantages . Disciplined approach . Creates global leader . Yield attractive returns . Increases efficiency and effectiveness . Provide strong brands in leadership positions . Leverages our service to the trade . Fuel earnings growth rates . Benefits consumers . Rapidly accretive to cash earnings . Low risk of integration . Maintain credit ratings . Fuel shareholder value - ------------------------------------------ ------------------------------------------ - ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== [Bar chart showing North American Food Kraft Foods North America 1999 Revenue ($ Billions) for Kraft, Financial Progress PepsiCo, ConAgra Branded, Nestle, Coca-Cola, Sara Lee, Nabisco, Pillsbury, % CAGR/pts. Mars and General Mills as indicated in (In Billions) 1994 1999 1994-'99 the following table] ----- ----- ---------- Volume (lbs.) 7.7 9.0 3.3% North American Food Revenue $14.7 $17.5 3.5% 1999 Revenue ($ Billions) IFO $ 2.2 $ 3.2 8.2% ------------------------- ROOR 14.8% 18.5% 3.7pts. Kraft $17.5 PepsiCo $13.2 ConAgra Branded $10.1 Nestle $9.5 Coca-Cola $8.1 Sara Lee $6.9 Nabisco $6.6 Pillsbury $6.1 Mars $5.5 General Mills $5.4 - ------------------------------------------ ------------------------------------------
- ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== [Bar chart showing Three-Year Organic IFO [Bar chart showing North American Food Growth (%) for Kraft Foods N. America, 1999 Revenue ($ Billions) for Kraft (as Quaker (NA), ConAgra (Branded Food), combined with Nabisco), PepsiCo, ConAgra Bestfoods (NA), General Mills (US), Branded, Nestle, Coca-Cola, Sara Lee, Campbell (Total Co.), Sara Lee (WW Pillsbury, Mars and General Mills as Meats/Bakery), Heinz (NA) and Kellogg indicated in the following table] (US) as indicated in the following table] Three-Year Organic North American Food IFO Growth 1999 Revenue ($ Billions) ------------------- ------------------------- Kraft Foods N. America 8.5% Kraft (as Quaker (NA) 7.5% combined with ConAgra (Branded Nabisco) $24.1 Foods) 6.9% PepsiCo $13.2 Bestfoods (NA) 6.5% ConAgra Branded $10.1 General Mills (US) 5.8% Nestle $9.5 Campbell (Total Co.) 5.4% Coca-Cola $8.1 Sara Lee (WW Meats/ Sara Lee $6.9 Bakery) 5.2% Pillsbury $6.1 Heinz (NA) 5.2% Mars $5.5 Kellogg (US) 4.2% General Mills $5.4 - ------------------------------------------ ------------------------------------------ - ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== [Bar chart showing Worldwide Food 1999 [Bar chart showing Worldwide Food 1999 IFO Revenue ($ Billions) for Nestle, Kraft ($ Billions) for Kraft (as combined with (as combined with Nabisco), Unilever Nabisco), Nestle, Coca-Cola, Unilever & & Bestfoods, Coca-Cola, PepsiCo, Mars, Bestfoods, PepsiCo, Heinz and Danone as Danone, Sara Lee, ConAgra Branded and indicated in the following table] Heinz as indicated in the following table] Worldwide Food Worldwide Food 1999 Revenue ($ Billions) 1999 IFO ($ Billions) ------------------------- -------------------- Nestle $46.8 Kraft $5.5 Kraft (as Nestle $5.0 combined with Coca-Cola $4.9 Nabisco) $34.9 Unilever & Unilever & Bestfoods $3.5 Bestfoods $30.4 PepsiCo $2.9 Coca-Cola $19.8 Heinz $1.7 PepsiCo $18.6 Danone $1.4 Mars $15.6 Danone $13.7 Sara Lee $10.6 ConAgra Branded $10.1 Heinz $ 9.3 - ------------------------------------------ ------------------------------------------ - ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== Major Snack Businesses [Pie chart showing U.S. Sales ($ Billions) - ---------------------- and 1999 growth (%) by Snack Category as . Cookies indicated in the following table] . Crackers . Nuts 1999 Sales 1999 Growth . Candy Snack Category ($ Billions) (%) . Gum -------------- ------------ ----------- . Dry Mix Desserts Breakfast Snacks $ 3.2 +8.3% . Cereal Bars Salty Snacks $13.6 +1.6% . Easy Cheese Cookies/Crackers $10.1 +4.4% . Toaster Pastries Candy/Gum $14.7 +3.6% Bakery Snacks $ 4.6 +3.2% [Bar chart showing Snacks % of Nabisco Nuts/All Other $ 3.5 +8.3% 1999 Revenue in U.S. (89%) and Worldwide (82%)] 1999 Total Sales = $50 Billion +4% Growth - ------------------------------------------ ------------------------------------------
- ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== Share of Meal Occasions (U.S.) Worldwide Cookie & Cracker Leadership Kraft Nabisco Total Share ----- ------- ----- ----- - ----------------------------------------- ------------------------------------------ Snacks 5.9% 13.5% 19.4% Nabisco 13.3% - ----------------------------------------- ------------------------------------------ Breakfast 2.8 0.1 2.9 Danone 9.0 Keeber 5.4 Lunch 6.9 0.5 7.4 ------------------------------------------ Nabisco JV 5.0 (United Biscuits) Dinner 4.4 0.2 4.6 ------------------------------------------ Nestle 4.0 Bahlsen 4.0 Others 59.3 ---------- 100.0% - ------------------------------------------ ------------------------------------------ - ------------------------------------------ ------------------------------------------- [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== =========================================== [Bar chart showing U.S. Cookie & Cracker International Cookie & Cracker Leadership ($ Share % and $ Share Pt. Chg.) Category of Nabisco, Keebler Food, Pepperidge Farm Country Share and Private Label as indicated in the ------- ----- following table] Canada 50% $ Share $ Share Pt. Chg. ------- ---------------- China 13 Nabisco 44.5% 0.4 Argentina 32 Keebler Food 22.9% 0.3 Venezuela 45 Pepperidge Farm 6.6% (0.2) Peru 30 Private Label 9.7% (0.2) - ------------------------------------------ -------------------------------------------
- ------------------------------------------ -------------------------------------------- [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== =========================================== Snack Nuts Category Sugar Confectionery Category 1999 1999 Share $ Share $ Share Change ------- -------- ------ - ------------------------------------------ -------------------------------------------- Planters 42.7% Nabisco 21.5% +3.5 Pts. - ------------------------------------------ -------------------------------------------- Private Label 21.8 Hershey 16.5 (1.6) Diamond 6.1 Mars 11.4 (0.6) Fisher-Sanfilippo 4.0 Others 50.6 (1.3) Others 25.4 - ------------------------------------------ ------------------------------------------ - ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== Specialty Categories International 1999 . More than double our Latin American $ Share presence -------- Steak Sauce . Increase revenue in Asia to $1.7 - ------------------------------------------ billion A.1. 62% - ------------------------------------------ . $2.1 billion United Biscuits Heinz 19 European business Others 19 Premium Mustard - ------------------------------------------ Grey Poupon 68% - ------------------------------------------ French's Dijon 11 Others 21 - ------------------------------------------ ------------------------------------------ - ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== [PICTURE OF KRAFT AND NABISCO PRODUCTS [KRAFT AND NABISCO LOGOS APPEAR HERE] APPEARS HERE] - ------------------------------------------ ------------------------------------------
- ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== Direct Store Delivery Direct Store Delivery . Effective direct store . Effective direct store delivery system delivery system . Leverage to achieve wider distribution - ------------------------------------------ ------------------------------------------ - ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== Direct Store Delivery Synergies . Effective direct store . Significant synergies will delivery system be captured . Leverage to achieve wider distribution . Improve ability to effectively meet needs of trade partners - ------------------------------------------ ------------------------------------------ - ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== Synergies Synergies . Significant synergies will . Significant synergies will be captured be captured . Increased productivity, higher . Increased productivity, higher margins, improved returns and margins, improved returns and accelerated growth accelerated growth . Annual cost savings: - $400 million in 2002 - $600 million in 2003 - ------------------------------------------ ------------------------------------------
- ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== Synergies Cost Synergies . Significant synergies will be captured . Procurement . Increased productivity, higher . Manufacturing margins, improved returns and accelerated growth . Distribution . Annual cost savings: . Sales - $400 million in 2002 . Administration - $600 million in 2003 . Kraft's proven track record in generating impressive productivity savings - ------------------------------------------ ------------------------------------------ - ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== Revenue Synergies Transition Opportunities . Confident integration will ------------- be smooth, rapid and successful Brand line extensions Scale merchandising Consumer promotions Cheese crackers/snacks Kid cereals Cereal snacks - ------------------------------------------ ------------------------------------------ - ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== Transition Transition . Confident integration will . Confident integration will be smooth, rapid and be smooth, rapid and successful successful . Considerable experience . Considerable experience integrating acquisitions integrating acquisitions . Share similar culture and management practices - ------------------------------------------ ------------------------------------------
- ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== Pro Forma Financial Data . Acquisition initially financed through debt [PICTURE OF KRAFT AND NABISCO PRODUCTS . IPO proceeds used to pay down debt APPEARS HERE] . Debt/EBITDA ratio 1.06 . Interest coverage ratio 8.0x - ------------------------------------------ ------------------------------------------ - ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== Financial Implications Financial Implications . Immediately accretive to cash EPS . Strong performance due to several factors . Accretive to EPS in 2002 - ------------------------------------------ ------------------------------------------ - ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== Financial Implications Financial Implications . Strong performance due to several . Strong performance due to several factors factors - Value - Value - Significant level of synergies - ------------------------------------------ ------------------------------------------
- ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== Financial Implications IPO Advantages . Strong performance due to several . Terrific for our shareholders factors - Value - Significant level of synergies - Maintain share repurchase program - ------------------------------------------ ------------------------------------------ - ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== IPO Advantages IPO Advantages . Terrific for our shareholders . Terrific for our shareholders . Enhances financial flexibility . Enhances financial flexibility . Preserves our options going forward - ------------------------------------------ ------------------------------------------ - ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== IPO Advantages IPO Advantages . Terrific for our shareholders . Terrific for our shareholders . Enhances financial flexibility . Enhances financial flexibility . Preserves our options going forward . Preserves our options going forward . Provides potential acquisition . Provides potential acquisition currency for the future currency for the future . Tool to motivate and retain employees - ------------------------------------------ ------------------------------------------
- --------------------------------------------- --------------------------------------------- [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ============================================= ============================================= IPO Advantages IPO . Terrific for our shareholders . Less than 20% of the "new" Kraft . Enhances financial flexibility . Proceeds will be used to retire debt . Preserves our options going forward . Provides potential acquisition currency for the future . Tool to motivate and retain employees . Underscore the value of Kraft's superb business - --------------------------------------------- --------------------------------------------- - --------------------------------------------- --------------------------------------------- [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ============================================= ============================================= IPO IPO . Parameters of the IPO will include: . Parameters of the IPO will include: - Optimal level of liquidity to ensure success - --------------------------------------------- --------------------------------------------- - --------------------------------------------- --------------------------------------------- [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ============================================= ============================================= IPO IPO . Parameters of the IPO will include: . Confident that equity markets will respond positively - Optimal level of liquidity to ensure success - Debt level that Kraft can maintain to assure a strong credit rating - --------------------------------------------- ---------------------------------------------
- ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== IPO IPO . Confident that equity markets will . Confident that equity markets will respond positively respond positively . World's most profitable food company . World's most profitable food company . Significant top-line momentum - ------------------------------------------ ------------------------------------------ - ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== IPO Strong Organization . Confident that equity markets will . World-class management team and respond positively workforce . World's most profitable food company . Significant top-line momentum . Unmatched earnings growth rates in the global food industry - ------------------------------------------ ------------------------------------------ - ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== Strong Organization Strong Organization . World-class management team and . World-class management team and workforce workforce . Focused on growth, innovation, . Focused on growth, innovation, productivity and results productivity and results . Talented Nabisco team - ------------------------------------------ ------------------------------------------
- ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== Milestones Summary . Acquisition estimated completion . Truly compelling transactions date by October, 2000 . Subject to shareholders and customary regulatory approvals . No anticipated impediments to closure foreseen - ------------------------------------------ ------------------------------------------ - ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== ========================================== Summary Summary . Truly compelling transactions . Truly compelling transactions . Creating an outstanding global . Creating an outstanding global food company food company . Phillip Morris Companies 1999 Pro Forma: - Revenues of $86.6 billion - Operating companies income $16.3 billion - ------------------------------------------ ------------------------------------------ [LOGO] Philip Morris Companies Inc. [LOGO] ========================================== Summary . Truly compelling transactions . Creating an outstanding global food company . Phillip Morris Companies 1999 Pro Forma: [PICTURE OF KRAFT AND NABISCO PRODUCTS APPEARS HERE] - Revenues of $86.6 billion - Operating companies income $16.3 billion . Earnings and EPS growth rates enhanced - ------------------------------------------ ------------------------------------------
EX-99.2 3 0003.txt REMARKS OF GEOFFREY C. BIBLE, CHAIRMAN AND CEO EXHIBIT 99.2 Remarks of Geoffrey C. Bible Chairman and Chief Executive Officer Philip Morris Companies Inc. Nabisco Acquisition Press Conference June 26, 2000 This is a very exciting day for all of us in the Philip Morris family of companies. I trust that you will share our enthusiasm for our acquisition of Nabisco and our plans for an IPO of Kraft. With me today are Bill Webb, our Chief Operating Officer; Betsy Holden, Chief Executive Officer of Kraft Foods North America; Roger Deromedi, Chief Executive Officer of Kraft Foods International; and Louis Camilleri, our Chief Financial Officer. They will assist me in fielding your questions once I conclude my remarks. As most of you know, we announced yesterday that we reached definitive agreements to acquire all the outstanding shares of Nabisco Holdings Corp. for $55 per share in cash. The transaction reflects an enterprise value of $18.9 billion, including the assumption of approximately $4.0 billion in net debt. Concurrent with this, we also announced plans to conduct an initial public offering, of less than 20% of the newly combined company, formed through the merger of Kraft and Nabisco. The IPO is targeted for completion in early 2001. My remarks will cover our rationale for these transactions and their impact on Philip Morris' growth prospects and shareholder value. For some time now we have said that Kraft was ready to absorb a sizable acquisition. The portfolio actions we have taken in the last few years, the emphasis on productivity and innovation, the caliber and depth of our world- class management team, and the level of our operating-income margins are such that today Kraft is undeniably the most efficient food company in the world. For those of you who follow us closely, you know that we take an extremely disciplined approach to acquisitions. I have often said that we would be willing to use our considerable financial firepower to add a sizable food business to Kraft as long as it met several key criteria. Any significant acquisition would have to: - be at a price that would yield attractive economic returns; - provide strong brands in leadership positions in growing categories; - fuel our earnings growth rates and be rapidly accretive to cash earnings; - have a low risk of integration; - enable us to maintain our credit ratings; - and fuel shareholder value and not impair, in any manner, our significant dividend and share-repurchase programs. The Nabisco transaction, coupled with the IPO of Kraft, fits squarely with each one of these key criteria. The combination of Kraft and Nabisco creates a real global leader in the food industry. Scale is a real advantage in this industry. As Kraft has proven, it increases both efficiency and effectiveness, leverages our service to the trade, and benefits consumers in numerous ways. Kraft has learned how to utilize this scale to deliver strong results year after year, and with $17.5 billion in revenues, Kraft Foods North America was already well ahead of its peers in 1999. This industry-leading scale has enabled Kraft Foods North America to make solid financial progress, with volume up 3.3% annually over the past five years; revenue up 3.5%; and income from operations up 8.2% to $3.2 billion, yielding a margin improvement of 3.7 points to 18.5%. During the past three years, this performance has enabled Kraft to move to the number one position in terms of organic income-from-operations growth, excluding acquisitions and divestitures. On the basis of 1999 pro forma figures, the combination of Kraft and Nabisco would create a 24-billion-dollar revenue company in North America and further strengthen Kraft's position. On a worldwide food-industry basis, Kraft would become a $35-billion company, as we would gain ground on Nestle and stay ahead of Unilever and Bestfoods. -2- In terms of worldwide food income from operations, Kraft would become number one, with $5.5 billion in income from operations - and that's before any synergies. In addition, we'll be moving ahead of Nestle and Coca-Cola, and we'll stay well ahead of Unilever and Bestfoods. The bottom line is that this is an important scale-enhancing opportunity for Kraft. Nabisco is also blessed with a particularly attractive product and brand portfolio which is heavily weighted towards snacking occasions, which meet today's growing demand for convenience products. Snacks accounted for 89% of Nabisco's U.S. revenues and 82% of its worldwide 1999 revenues. The high-margin snacks category is large and growing. In the U.S. alone, the category accounted for some $50 billion in retail sales in 1999, which grew at 4%. This is twice the total food industry rate. Cookies and crackers grew at a faster clip, at 4.4%. In addition, several other segments in which Nabisco is a leader, such as candy and gum, also grew at healthy rates. Today, Kraft has a 6% share of snacking. Tomorrow that share will grow to nearly 20%, providing us with a superb platform to accelerate Kraft's top-line growth. Nabisco also enjoys strong competitive positions. It is the worldwide leader in cookies and crackers with a 13% share, and together with its current stake in the former United Biscuits, would command an 18% share. In the U.S., Nabisco has a growing 44.5% share of the cookie and cracker category, significantly ahead of Keebler, Private Label, and Pepperidge Farm. It is also the international cookie and cracker category leader in Canada, China, and several markets in Latin America, including Argentina and Venezuela. And that excludes United Biscuit's number one share position in the UK and Benelux. Planters holds a commanding 42.7% share of the growing nuts category in the U.S., and its revenues were up 14% in 1999. And, through the combination of LifeSavers and the recently acquired Favorite Brands business, Nabisco is the clear leader in the U.S. sugar-confectionery category, with a 21.5% share, up 3.5 share points. A number of other brands are household classics. For example, A.1. steak sauce has a 62% share of its category, while Grey Poupon commands a 68% share of the premium mustard category. -3- Internationally, Nabisco's operations complement Kraft's geographically. In Latin America the acquisition will more than double our size, to $2.2 billion in sales, and in Asia it will increase sales to a combined total of $1.7 billion. In Europe, as I said earlier, Nabisco has a 27% stake in the former United Biscuits, which had $2.1 billion in sales in 1999. On a combined basis, Nabisco will add 18 $100-million brands to Kraft's existing 55, for a total of 73 with annual revenues exceeding $100 million. We believe that this roster of premium brands is unrivaled. Kraft will now have seven mega-brands, each with revenues exceeding $1 billion: Kraft, Nabisco, Philadelphia, Oscar Mayer, Jacobs, Post and Maxwell House. Nabisco will also add a successful and very effective direct store-delivery system here in the U.S. and elsewhere to Kraft's existing infrastructure. We intend to leverage this system by adding selected Kraft products to achieve wider distribution and enhanced merchandising. This additional arrow in Kraft's quiver, combined with Kraft's enhanced worldwide scale, will also improve its ability to better meet the needs of our trade partners. The integration of Kraft Foods and Nabisco will yield significant synergies that we will capture rapidly. These synergies will generate increased productivity, higher margins, improved returns on capital, and accelerated revenue and earnings growth. We plan to capture annual cost savings of more than $400 million in 2002, growing to approximately $600 million by 2003. Kraft's proven track record and expertise in generating significant productivity savings and the enhanced scale of the combined company will enable us to reduce Nabisco's costs to world-class levels. These savings will be derived primarily from programs affecting the procurement, manufacturing, distribution, sales and general and administrative functions. In addition, we project significant revenue synergies resulting from the combination of the two brand portfolios. The largest opportunities are in brand line extensions and the exploitation of large-scale cross-merchandising opportunities and consumer promotions. After all, what better combination is there than Kraft cheese and Ritz crackers? -4- We are confident that the integration process will be smooth, rapid and successful. Our confidence rests on the fact that over the years we have gained considerable experience in successfully integrating large-scale acquisitions, both domestically and internationally. And with Nabisco, we share similar cultures and management practices - not altogether surprising, given that Nabisco has many Kraft alumni in leadership positions. So there you have it. The merger of Kraft and Nabisco will create the world's most profitable food company and provide a future of even greater opportunity for a company whose performance and prospects are already very strong. The acquisition, coupled with the IPO of Kraft, will yield attractive financial performance measures. The acquisition of Nabisco will be financed initially through a combination of short-term debt and bank borrowings. We believe that the IPO will generate proceeds of between $5 billion and $10 billion, which we currently estimate to represent 10% to 15% of Kraft's equity. Proceeds from the IPO will be used to retire debt. Upon completion of the IPO, Philip Morris' debt-to-EBITDA ratio will be 1.06 and its interest coverage will be a comfortable 8 times. Goodwill resulting from this transaction will total an estimated $18.5 billion, which will be amortized over a 40-year period. We are delighted that earlier this morning both S&P and Moody's affirmed our credit ratings. We expect that the transaction will be immediately accretive to Philip Morris' cash earnings per share, and to further underscore the attractiveness of this combination, it will be accretive to earnings per share in 2002. Assuming completion of the acquisition this October, our 2000 reported earnings per share will remain essentially unaffected and our 2001 reported earnings per share will only be very moderately dilutive. -5- This strong performance is due to several factors. First, the price we paid was attractive and compares favorably to recent transactions in the food industry. Second, the level of synergies that we plan to achieve are significant. And third, the IPO provides us with the financial flexibility to maintain our share repurchase program. The IPO has a number of advantages. - First and foremost, it is terrific for shareholders. - It enhances Philip Morris's financial flexibility. - It preserves our options going forward. - It provides us with a potential acquisition currency for the future. - It creates a superb tool to motivate and retain employees and more closely aligns their compensation with the performance of the food business. - And it will underscore the value of Kraft's superb business within the Philip Morris family of companies. Our intention is to conduct an IPO of less than 20% of the "new" Kraft. As I said earlier, the IPO proceeds will be used to retire a portion of the debt that will be incurred as a result of the acquisition of Nabisco. While still some six months away, the parameters that will dictate the actual size of the IPO will include: The optimal level of liquidity required to ensure the success of the IPO; and the level of debt that Kraft can maintain to assure a strong credit rating. We are confident that the equity markets will respond positively to the planned IPO. Kraft will not only be the world's most profitable food company, it will enjoy significant top-line momentum and a strong earnings growth profile. Indeed, we believe its earnings growth rates will be unmatched in the global food industry. Kraft is also blessed with a management team and work force, both in North America and internationally, that is the envy of its peers. We have a management depth that is unparalleled in the industry, as exemplified by both Betsy Holden and Roger Deromedi, world-class leaders, relentlessly focused on growth, innovation, productivity and results. We are excited to welcome the talented Nabisco team to our family. I would like to take this opportunity to acknowledge Jim Kilts, President and CEO of Nabisco, for whom I have the highest regard. Jim leaves us with a great company, and we wish him well in his future endeavors. -6- We anticipate that the Nabisco acquisition will be completed by October 2000. It is subject to approval by the shareholders of Nabisco Group Holdings and requires customary regulatory approvals. We do not anticipate any impediments to closure. The transactions I have outlined are truly compelling from a strategic, financial and shareholder-value perspective. The addition of Nabisco to Kraft will create an outstanding food company and will accelerate Kraft's top-line and income growth rates. The addition of Nabisco would have resulted in 1999 Philip Morris Companies pro forma revenues and operating companies income of $86.6 billion and $16.3 billion, respectively, solidifying our position as the world's largest and most profitable consumer packaged goods company. Finally, our earnings and earnings-per-share growth rates will be enhanced by this acquisition to levels that we believe will be unmatched by any other major consumer packaged goods company in the world. Thank you. ******************************************************************************** Forward-Looking and Cautionary Statements - ----------------------------------------- All statements included in this press conference that are not purely historical are "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Investors should be aware of the following important factors that could cause actual results and outcomes to differ materially from those contained in such forward- looking statements. Nabisco and each of the Company's consumer products businesses are subject to intense competition, changes in consumer preferences, the effects of changing prices for their raw materials, local economic conditions and currency movements. Kraft's results are dependent upon its continued ability to promote brand equity successfully, to anticipate and respond to new consumer trends, to develop new markets and to broaden brand portfolios in order to compete effectively with lower priced products in a consolidating environment at the retail and manufacturing levels, to improve productivity and to achieve the synergies anticipated from the Nabisco acquisition. Moreover, the Company's tobacco subsidiaries continue to be subject to increasing marketing and regulatory restrictions, excise tax increases, declining consumption, litigation and bonding risks, including risks associated with adverse jury and judicial determinations, courts reaching conclusions at variance with the Company's understanding of applicable law, and the absence of adequate appellate remedies to get -7- timely relief from any of the foregoing. Developments in any of these areas, many of which are more fully described in the Company's most recent annual and quarterly reports filed with the SEC, could cause actual results and outcomes to differ materially from those contained in the forward-looking statements in this release. The Company cautions that the foregoing list of important factors is not exclusive. The Company does not undertake to update any forward-looking statement made in this press conference to reflect any change in management's expectations with regard thereto or any change in events, conditions, assumptions or circumstances on which such statements are based. * * * * * * * * * * * * * * * * * * * * * * * * * * * This press conference is not an offer to sell, nor the solicitation of an offer to buy, any securities. Any offer will be made only by means of a prospectus that will be registered with the Securities and Exchange Commission. ****** -8- -----END PRIVACY-ENHANCED MESSAGE-----