New Philip Morris Bosses Discuss Reasons Against Breakup
Jun. 21, 1994
NEW YORK (AP) _ The new leaders of Philip Morris Companies Inc. said Tuesday its board shelved a plan to split its food and tobacco businesses due to legal complications and doubts that it would create more value for shareholders.
Three days after being named to their new jobs, chairman R. William Murray and chief executive Geoffrey C. Bible offered the $61 billion company's first public comments on why its board decided against a breakup last month.
They also agreed to meet July 13 with large shareholders who want to talk with management about how the company can help boost the value of their stock, which has fallen nearly 30 percent in three years.
Some shareholders continue to favor splitting the tobacco and food businesses.
Murray said his top priorities in his new job would be to foster growth rates in Philip Morris' businesses that compare favorably to other American companies and to boost its stock value.
Bible indicated Philip Morris would continue to defend the tobacco industry and smokers against attacks in Congress, the courts and the media.
Murray and Bible were named to their new posts over the weekend after the surprise resignation of Michael Miles, the ex-Kraft food company boss who led Philip Morris since late 1991.
Miles was said to have backed the breakup against opposition from forces allied with the tobacco side of the conglomerate, which claims the title of the world's largest in tobacco and second biggest in food.
Miles' tenure saw Philip Morris trigger a fierce cigarette price war which sapped profits but allowed Marlboro to recover lost market share from cheaper brands and solidify its stature as the best-selling cigarette brand.
The tobacco industry has also been under intense attack from anti-smoking advocates who want higher taxes and tighter regulation of the industry. It also faces a new round of lawsuits that claim cigarettes are addictive.
In addition to Marlboro and Virginia Slims cigarettes, Philip Morris makes Oscar Mayer meats, Miller beer, Maxwell House coffee and Jell-O desserts.
Meeting with reporters between visits with employees, Murray and Bible said all the company's businesses were performing well.
Murray said the company's strong cash flow will enable them to consider a wide range of options to boost value for shareholders including stock buybacks, a more aggressive dividend position and debt reduction.
The company will continue to look at structural alternatives, may buy something or may sell nonstrategic or underperforming businesses, Murray said.
He said the company would most likely pursue international food purchases, possibly in Eastern or Central Europe, and may expand Miller Brewing's international business by buying minority stakes.
Murray said no major acquisitions are expected, however.
On the issue of the possible breakup of the company, Murray said the board decided against it in May because it was unclear that separating the businesses would result in ''a meaningful improvement and an enduring improvement in shareholder value.''
He said there were also complicated legal and structural problems that could have prompted litigation that could have proven distracting to running the business.
The company failed to provide a public explanation for its actions when it announced in May that it would not split up.
Murray also said top management agreed to meet with a vocal group of big shareholders who had been demanding a meeting to discuss dividing the company.
Bill Patterson, a spokesman for the Teamsters union, whose 150 pension funds have about $170 million invested in Philip Morris, said he welcomed the meeting but wished it had come sooner. He said some institutional investors still want to see the domestic tobacco business spun off into a separate company to isolate its legal problems.
''The idea has not been put to rest in the minds of investors in this company,'' Patterson said.
In active late trading on the New York Stock Exchange, Philip Morris was up $1 at $51.75.