Mergers & Acquisitions: Kraft, Morgan Stanley, and Alcatel Making Deals
Kraft Foods (NYSE:KFT) plans to split into two businesses. It will spin-off its North American grocery business which includes brands like Velveeta, Kraft macaroni and cheese, and Oscar Mayer meats, while keeping its global snacks business, which includes brands like Oreo, Cadbury, and Trident. The company’s snacks business is growing rapidly, while its grocery business, more established, generates a lot of cash and has strong profit margins, but has slower growth. By splitting the two, Kraft is allowing shareholders to choose between two very different stocks. Kraft’s snack business generates $32 billion in annual sales while the grocery business generates $16 billion in sales.
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Morgan Stanley (NYSE:MS) plans to sell its mortgage-servicing arm Saxon Mortgage Services. The investment bank has been quietly shopping around for prospective buyers, including Ocwen Financial Corp. (NYSE:OCN), which bought Litton Loan Servicing from Goldman Sachs (NYSE:GS) just two months ago for $600 million. Morgan Stanley is hoping to fetch a similar price for Saxon, which the bank bought for $700 million in 2006.
Telecommunications equipment supplier Alcatel–Lucent (NYSE:ALU) is looking for potential buyers, as the company’s valuation has been plummeting ever since it bought Lucent in 2006, falling from a peak worth of $100 billion to its current value of $7.8 billion. The company’s patents alone could be worth twice as much as Nortel’s, which sold for $4.5 billion in a bankruptcy auction in June. Alcatel’s various units hold 18,800 U.S. patents, which could make Alcatel worth up to $20 billion in a sale.