Phillip Morris buys Nabisco for $18.9 billion

NEW YORK - Philip Morris Companies, which owns Kraft Foods, announced yesterday that it has reached an agreement to purchase Nabisco Holdings, the nation's No. 1 cookie-and-cracker maker, for $14.9 billion plus the assumption of $4 billion in debt.

New York-based Philip Morris is the world's largest tobacco company with its Marlboro, Benson & Hedges and Parliament brands.

Its Kraft Foods subsidiary oversees marketing of its cheese products, as well as such brands as Jell-O, Maxwell House, Oscar Mayer and Post cereals.

The announcement of the sale at $55 a share ended a bidding war involving financier Carl Icahn and a venture of France's Danone SA and Britain's Cadbury Schweppes PLC. The Danone-Cadbury offer was for about $50 a share.

Nabisco Holdings, which makes Oreo and Chips Ahoy! cookies; Ritz and SnackWells crackers; Grey Poupon mustards; and Life Savers candy, is 80.6 percent owned by Nabisco Group of Parsippany, N.J.

Nabisco Group also said yesterday that after shedding the Nabisco Holdings unit, what remained of the group - essentially cash from the Nabisco sale - would be sold to R.J. Reynolds Tobacco. R.J. Reynolds Tobacco had been a subsidiary of the group before it was spun off last year as a separate publicly traded entity.

Nabisco Group said the price for that deal was $9.8 billion, or $30 a share.

Philip Morris chairman and chief executive Geoffrey Bible said in a statement that the purchase will greatly expand the company's food offerings.

"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."

Kraft's revenue last year was $34.9 billion, while Nabisco's was $5.5 billion, Philip Morris said. The combined company is expected to be the second-largest in the world, behind Nestle of Switzerland.