On October 18, 1988, Philip Morris offered to purchase all Kraft common stock at $90 per share in cash. This offering represented a 50% premium over the $60.12 closing price that day. Philip Morris proposed to finance the acquisition of Kraft with $1.5 billion in excess cash available in there bank credit line, that was valued at $12 billion. Philip Morris maintained its debt-to-value ratio at around 20%. Philip Morris had distributed nearly $750 million in dividends to its shareholders in 1987.
Factors in addition to the ones previously mentioned, make Kraft a likely target for a takeover. Kraft is now an all food business upon recently completing a divestiture of Duracell. Kraft had a low debt to value ratio of 15%. All three of Kraft's divisions; US consumer foods, US commercial foods, and International foods were doing good with popular brand names such as Miracle Whip, Seven Seas, Velveeta, Parkay, Lenders Bagels and Brayers. In 1987 the US consumer foods had sales of $4.5 billion and a operating profit of 593 million. The US commercial food unit has sales of $3 billion and a operating profit of $86.4 million. International Food had sales of $2.3 billion and an operating profit of $229.8 million. Kraft's projected sales growth for the next severely years is in the range of 12% to 15%. Net sales form continuing operations were 99 billion in 1987. This was an increase of 27 percent from1986. Net income from continuing operations rose 11 percent in 1987. Kraft had distributed $240 million in cash for dividends to its shareholders in 1987.