If you order a Big Mac or hamburger with cheese at any of your favorite restaurants, anywhere in the US, then chances are, your cheese is made by Kraft Foods, Inc., (NYSE: KFT), (“Kraft Foods”), the largest branded food and beverage company in the United States and the world’s second largest, only behind Nestlé, based on 2000 pro forma revenue. The company’s fiscal year is December, and as of January 21, 2009, according to the company’s web site, Kraft.com, it has approximately 103,000 employees worldwide and more than 180 manufacturing and processing facilities worldwide.
Based in Northfield, Illinois, Kraft Foods, Inc’s North America unit makes the world’s largest cheese brand (Kraft), owns the cookie and cracker business (Nabisco) and makes the US’s most favorite, Oreos. Its brand products are distributed worldwide through its international business unit. Kraft Foods has one of the world’s most recognizable core brands which are sold in more than 140 countries, and according to A.C. Nielsen, are enjoyed in 99.6% of the households in the United States.
The company’s brands and businesses including; Oscar Mayer, Kraft, Philadelphia, Maxwell House, Nabisco, Oreo, Jacobs, Milka, and LU brands, which together have quarterly revenues of nearly $10 billion (MSN Money). The company was founded in 1767 and in 1988, Kraft, Inc (http://www.kraft.com) became a part of Altria Group, previously known as Philip Morris Companies Inc., which purchased Kraft for $12.9 billion, and operated it as a wholly-own subsidiary until 2007 when it was spun off, amid that the Altria’s tobacco lawsuits, a result of alleged second hand smoke would tarnish Kraft’s image, in terms of consumers.
Prior to going public, Kraft Foods generated 2000 pro forma revenue of $34.7 billion and 2000 pro forma earnings before interest, income taxes, depreciation and amortization of $6.3 billion. The company filed with the US Securities and Exchange Commission (SEC) for its long awaited and most anticipated Initial Public Offering (IPO) on March 13, 2001, and went public on June 10, 2001, traded on New York Stock Exchange (NYSE) under the ticker symbol; KFT. Its initial proposed stock price was set at $30.00 to $31.00, but the actual offer price was $31.00. Its stock price on the first day of trading was $31.00, and closed at $31.25 at the market closing time, a net gain of 25 cents. The company’s shares offered at IPO was 280 million shares, with an offering amount of $8.7 billion, making it one of the largest IPO offering, ranked only second behind 2001’s $10 billion-plus offering of stock in AT&T Wireless, which by far, was the richest U.S. initial public offering ever.
The offering price valued Kraft Foods at about $53.8 billion, and as of today, January 21, 2009, 5:00 PM EST, according to Yahoo! Finance, Kraft Foods market capitalization is value at $41.62 billion, a 22.64% drop since its IPO.
“The 280,000,000 Class A shares offered in the IPO represent 16.1% of the combined total of 1,735,000,000 Class A and Class B shares outstanding immediately after the offering. Net proceeds of the offering of approximately $8.4 billion will be used to repay a portion of Kraft’s long-term notes payable to Philip Morris” (AllBusiness.com). “We will use the net proceeds from this offering to retire a portion of an $11.0 billion 7.75% note payable to Philip Morris, due in December 2002, incurred in connection with the Nabisco acquisition” (Edgar Online).
The company’s shares outstanding at IPO were 555 million, but its post IPO offering were 1,735 billion shares. Today, January 21, 2009, Kraft Foods stock closed at $28.33, its highest traded price was on May 28, 2002, at $43.01, that’s a drop of 65.56% since May 28, 2002, and its lowest trading since it went public was when it closed at $26.56 on November 17, 2008.
“Kraft Foods’ IPO was underwritten by several underwriters including; Credit Suisse First Boston, Salomon Smith Barney, Deutsche Banc Alex. Brown, J.P. Morgan Securities, Inc., Morgan Stanley Dean Witter, UBS Warburg LLC, BNP Paribas Group, HSBC Securities, Inc., Lehman Brothers Incorporated, Blaylock & Partners, L.P., Dresdner Kleinwort Benson, Prudential Securities, Inc., Ramirez & Co., Inc., Sanford C. Bernstein & Co., Inc., and Utendahl Capital Partners, L.P” (Edgar Online).
On November 15, 2007, Kraft Foods agreed to merge its Post cereals business into Ralcorp Holdings, Inc., and on June 25, 2008, “Kraft commenced its exchange offer related to the split-off transaction of its Post cereals business. Kraft will provide indicative calculated per share values and exchange ratios for each of the trading days that the exchange offer is open. The final exchange ratio will be calculated using the volume weighted average stock prices (VWAP) of Kraft and Ralcorp on July 30, July 31 and August 1, 2008, and will be announced by 4:30 pm ET on August 1. The exchange offer will expire at 8:00 am ET on August 4, 2008, unless extended” (Edgar Online).
The lowest drop in its stock price on November 17, 2008, was probably the result of its Post merge with Ralcorp Holdings, Inc. According to its balance sheet for the quarter ended on September 30, 2008; the company had a cash and cash equivalents of $737 million, while its total current assets are capped at $11.3 billion, total assets of $66.9 billion. Its total current liabilities are $10.3 billion, with total liabilities of $40.5 billion. The net tangible assets are (-$15.7 billion), while its long term debts are $18.9 billion. The company’s account payable is $6.09 billion. (Yahoo! Finance).
Today, amid the current US economic crisis and the recession, Kraft Foods, Inc. is still strong, its stock performance is relatively steady, part of the Dow 30, and is one of the world’s most actively traded companies on Wall Street.
Disclosure
I am currently not an investor nor do I have an immediate investment interest in Kraft Foods, Inc. I have not been compensated by anyone, in any way, shape or form, to write and publish this article anywhere.
References
MSN Money. “Kraft Foods Inc”. IPO Center. Retrieved on Wednesday, January 21, 2009, from http://premium.hoovers.com/global/msn/factsheet.xhtml?ID=103392.
US Security and Exchange Commission. Edgar Online. Retrieved on Wednesday, January 21, 2009, from http://www.sec.gov/edgar/searchedgar/companysearch.html.
Yahoo! Finance. Kraft Foods Inc. (KFT). Retrieved on Wednesday, January 21, 2009, from http://finance.yahoo.com/q?s=KFT.
Kraft, Inc. Official Corporate Web site. Investor Center. Retrieved on Wednesday, January 21, 2009, from http://www.kraft.com/default.htm.
Simon Kapenda 