In making an extravagant $11.8 billion bid to take over Kraft Inc., a major food company, the tobacco firm of Philip Morris Cos. Inc. is continuing a trend that began in 1985. Tobacco is still profitable, but the domestic market is declining and wealthy cigarette firms are seeking to expand in other directions.
But there is cause for alarm in the Philip Morris bid to acquire Kraft, in what would be the second largest merger in U.S. history. At the moment, Kraft officials are opposed to the takeover, but they may not be able to withstand a $90 per share offer. That bid is $30 higher than the $60 per share stock market price quoted earlier this week.If the merger takes place, it would leave Philip Morris as the world's largest maker of consumer goods and a giant in the American food industry. Philip Morris already owns General Foods, which it purchased in 1985 for $5.6 billion.
Big firms are not automatically bad firms. Even so, there's room for wondering if the tobacco company might abuse its expanded power.
Joe Tye, an official of a national program to discourage teen smoking, warns that the advertising and marketing clout acquired by the tobacco firm is ominous. Such heavy control over the food industry could be used to help the tobacco end of the business, or to punish anti-smoking entities.
For example, Tyne warns, some publications that now reject tobacco ads might reverse their policy rather than risk the loss of food-related advertising by the same company.
Also, would tobacco companies stoop to using their food industry power to coerce anti-smoking activities? They just might judging from some previous experience.
Earlier this year, the R.J. Reynolds Tobacco Co., which bought the food giant, Nabisco, in 1985 for $4.8 billion - and became RJR Nabisco - used its food industry clout in a way that outraged many people.
An advertising company that handled the Nabisco food account, but no tobacco accounts, prepared an ad for another client, Northwest Airlines, promoting the airline's new non-smoking policy. The ad agency was promptly fired by RJR Nabisco, whose officials said they were going to get tough with entities having anything to do with anti-smoking efforts.
Is that the kind of control that Americans - 70 percent of whom are non-smokers - want over the nation's major food industries? The Justice Department should take a close look at the power tobacco companies are gaining through gigantic mergers.