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Nabisco faces bidding war
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May 15, 2000: 3:38 p.m. ET
Danone, Icahn, Philip Morris lead growing list of suitors for food concern
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NEW YORK (CNNfn) - Several food and consumer products companies, including French food conglomerate Group Danone, have joined financier Carl Icahn in making bids for Nabisco Group Holdings, setting the stage for one of the largest bidding wars Wall Street has seen in years.
Paris-based Danone confirmed Monday it is interested in adding the maker of Ritz crackers, Oreo cookies and Milk-Bone dog biscuits to its diversified holdings, which already include Dannon yogurt, Evian bottled water and Britannia cookies and biscuits.
The company said it is particularly interested in adding Nabisco's sizable biscuit company, which includes everything from Nilla Wafers to Snackwell's cookies to Teddy Grahams. The unit recorded sales of $881 million and a profit of $132 million during the recently completed first quarter.
Danone joins takeover mogul Icahn as the only entities to publicly confirm their interest in Nabisco, whose sole asset is a majority stake in Nabisco Holdings Corp. (NA: Research, Estimates). Icahn last week told company officials he would offer $22 in cash and financing for the parent, valuing Nabisco (NGH: Research, Estimates) at $7.18 billion.
"This is probably the best food asset that has been put up for sale in over a decade," John McMillin, a food industry analyst with Prudential Securities, told CNNfn's In The Money. "What is surfacing as these first bids are coming in is there is a good deal of interest across the board."
Nabisco spokesman Henry Sandbach would not comment on the ongoing negotiations, other than to say several companies had made bids. The first round of bidding for Nabisco ends Monday.
"There has been significant interest in this process and it's moving forward," Sandbach said.
Philip Morris taking the lead?
Tobacco marketer Philip Morris (MO: Research, Estimates), the owner of Kraft Foods, also reportedly has offered to buy Nabisco, according to Monday's Wall Street Journal, which quoted people familiar with the matter. A company spokesman declined to comment on possible negotiations.
Analysts have long speculated Philip Morris would emerge as the front-runner to purchase the troubled Nabisco because it could easily absorb whatever tobacco-related legal liability the New York-based company retained.
Investors leery of such liability sent Nabisco's stock into a nearly year-long slump before Icahn threatened a proxy fight in March to force the company's sale. Icahn eventually signed a confidentiality agreement to negotiate with the company, which also hired Morgan Stanley Dean Witter and Warburg Dillon Read to explore its strategic options.
Since then, no fewer than 13 companies reportedly have signed confidentiality agreements with Nabisco, according to published reports, setting the stage for an intense bidding war.
 Interestingly, one company mulling a bid is R.J. Reynolds Tobacco Holdings Inc., the tobacco interest spun off from Nabisco's holding company last year. The Wall Street Journal reported RJR would be interested in purchasing the cash-filled parent company if another bidder captured Nabisco Holdings.
Martin Feldman, a food and tobacco analyst with Salomon Smith Barney, said RJR remains the most obvious buyer because "it is the only purchaser that would not acquire any additional tobacco litigation exposure." An RJR spokeswoman declined comment.
However, Feldman said he believes Philip Morris is the "natural buyer" for Nabisco, whose operations would be highly complimentary to Kraft Foods'.
McMillin said he believed Danone was the most likely buyer at this point, given the synergies they could obtain from Nabisco's biscuit business, but he expected the price to go much higher than what was being discussed now. In general, analysts now believe Nabisco could ultimately fetch between $25 and $35 per share.
"This is a real premium asset," he said.
Meanwhile, Icahn's holdings in Nabisco continue to appreciate. Icahn accumulated more than 31 million Nabisco shares in March when the company's stock was trading at less than $10 per share. Since that time, the stock has nearly doubled, driven by his demands for a sale.
Nabisco's stock jumped 2-13/16 to 22-1/2 late Monday afternoon, while Philip Morris's stock climbed 2-9/16 to 26-7/8. Danone shares in Paris closed up 0.8 percent at 265.60 euros, after climbing as high as 271 euros.
The interest in Nabisco comes just days after European consumer products maker Unilever offered $18.4 billion for Bestfoods (BFO: Research, Estimates). That bid was rejected, but analysts expect the union to occur at a higher price, possibly setting off a rapid consolidation in the food industry. 
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