Monday, Jun. 17, 1985
Business Notes Acquisitions
While General Motors went shopping last week for a high-tech aircraft and ) electronics manufacturer, R.J. Reynolds seemed convinced that plenty of money could still be made on cookies and crackers. Reynolds, the second largest U.S. cigarette maker, agreed to buy Nabisco Brands, the fifth biggest food manufacturer, for $4.9 billion. The merged company will have annual sales of more than $19 billion, making it the largest consumer-products firm in the U.S.
Troubled for years by an increasingly strident antismoking movement, Reynolds has long been eager to reduce its dependence on tobacco. Cigarettes currently account for 75% of the company's earnings. It has already acquired Kentucky Fried Chicken, Del Monte foods, Canada Dry soft drinks and Heublein's liquors and wines. The addition of Nabisco favorites, including Oreo cookies, Ritz crackers, Planters peanuts and Baby Ruth candy bars, will give Reynolds a full pantry of profitable products. Moreover, the acquisition will enable Reynolds to be much stronger overseas. Foreign sales account for about 37% of Nabisco's business, compared with only 21% at Reynolds. All in all, the Nabisco deal could put Reynolds well on its way to becoming a global Cookie Monster.