NORTHFIELD, Ill. -- The head of the world's second-largest food company, Kraft Foods Inc., said earlier this week that it would be difficult to make large acquisitions ahead of its full spinoff from majority owner Altria Group Inc.
Very large acquisitions will be difficult as the Altria situation precludes acquisitions using a lot of stock, said Kraft CEO Roger Deromedi in an interview with Reuters. He declined to define the size of a very large acquisition.
Altria, which owns cigarette maker Philip Morris and almost 87% of Kraft, [image-nocss] needs to clear a number of legal hurdles regarding tobacco litigation in the United States before it can spin off Kraft completely.
Analysts have speculated that Kraft might look to buy France's Danone or Britain's Cadbury Schweppes Plc to expand out of its North American heartland, which still accounts for 68% of group sales.
Kraft, the group behind Maxwell House coffee, Oreo cookies and Philadelphia cheese, has not made a big acquisition since buying Nabisco in 2000, when it was fully owned by Philip Morris, but is looking to expand in its four key category areas, it said.
Northfield, Ill.-based Kraft, second only to Swiss-based Nestle in the food world, makes 55% of its sales from coffee, cheese, cookies and beverages and said it is looking to expand these businesses around the world. We are focused on our global core areas and acquisitions in these areas, said Deromedi, adding that the group would gain greater flexibility to make acquisitions once the spin-off from Altria was complete.
Altria is currently clearing legal hurdles to avoid any tobacco litigation risk attaching to a newly spunoff Kraft, and analysts believe the earliest this process could be completed and Kraft floated off would be later this year.
Deromedi declined to comment about possible acquisition targets such as Danone and Cadbury or its interest in Britain's privately owned United Biscuits (UB), in which it has a 25% stake alongside three private equity owners.
Analysts have highlighted that Kraft might be attracted to Danone's range of dairy products, cookies and bottled water or Cadbury's chocolate, though most talk late last year surrounded a possible bid for Danone from PepsiCo Inc.
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