Philip Morris - Kraft Case

1996 Words May 18th, 2011 8 Pages
”Philip Morris - Kraft” Case
Nurettin Y¨cesu (10516099) - Pınar Dilhan Eldemir (10652007) u April 25, 2011

1

Introduction

In this case, we will analyse how a hostile takeover creates benefits for both parties. The hostile takover approach can be considered as ”taking over a company with a hostile manner” but with the offers and deals, it becomes a solution to many different structures within the company. The decisionmaking through a case as this requires experienced, rational management skills to take the right position with a right choice. The one of the world’s biggest packed food company, Kraft Foods Inc. has so many innovations and mergers on the same sector. Kraft has been started to work on the cheese sector and generated many
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PM generated its sales and profits from its own business segment, that is, tobacco segment. One of the reasons of acquisitions is declines in tobacco consumptions. To create an sufficient market share in the sector, PM had had to make some acquisitions. In those years, the reasonable one was to buyout some firms in the food and brewery industry and according to our visual, these sectors are good choices. Because these sectors was vital and bubils of the market. In that period, Grand Metropolitan bid for Pillsburry. All these merges had been increasing the net earnings and book value of common stocks. PM had had to consent higher price but according to our vision this merge is beneficial for both of them as done for other firms. Miller Brewery Company and General Food has brougth a success to PM but not so much. Kraft was an all food business and they had completed divestiture of Duracell. Nominately, They was doing their best. Meanwhile, PM is strategically successful by decision of acquisition of Kraft. Bid for Kraft was almost more than 73 times Kraft’s book value of the common stocks.

3

The Merger

After the negotiation period, Philip Morris and Kraft negotiated with an agreed price nominated in $106/sh. In our opinions, this acquisition was a well-process. Because the benefits which we will discuss in the conclusion section, from this merger is bigger than the losses. After merger if we look to the behavior of the market, the

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