Brand Names Become Hot Assets in Takeover Games

Article excerpt

In the supermarket, everyday products like Velveeta and Oreos sell for a few dollars or less.

In the frantic market where companies are bought and sold, those products are worth billions.

The high-priced bidding now under way for some of the nation's largest consumer products companies illustrates the value of such well-known brand names and the gamble that many investors are willing to make to control them.

While established products are by no means invulnerable, companies increasingly think that names like Kraft in cheeses or Parkay in margarine are their most valuable assets, more so than factories, real estate or even employees, according to analysts, executives and other experts.

Once a brand-name product - especially a market leader - has become familiar to the consumer through advertising and repeated use, its sales tend to remain healthy even during economic slumps or periods of corporate mismanagement.

A study of 30 product categories by the Boston Consulting Group found that of the brands that were No. 1 in their category in 1930, 27 are still No.1. Among them are Ivory Soap, Campbell's Soup and Gold Medal flour.

``With an established brand name, the product keeps selling through thick and thin,'' said Emanuel Goldman, an analyst at Paine Webber Inc.

Because they are confident that their targets' brands will generate a steady flow of cash that can be used to repay debt, the companies, managers and investors bidding for three huge food companies - RJR Nabisco, Kraft. and the Pillsbury Co. - think they can safely borrow huge sums to finance the deals, analysts said.

They are also confident because those companies have mastered the complicated art of exploiting household names.

The allure of established consumer products is proving strong to some of the nation's most astute investors and executives.

RJR Nabisco, in addition to Oreos and Del Monte fruits and vegetables, sells Ritz crckers, Planters peanuts, Milk Bone dog biscuits and A-1 Steak Sauce, as well as Salem and Winston cigarettes.

RJR Nabisco said last week that some of its top managers, along with Shearson Lehman Hutton Inc., were considering offering $17.6 billion to buy out the company's public stockholders. This week, the investment firm Kohlberg, Kravis, Roberts & Co. entered the bidding with an offer of $20.6 billion.

Kraft, in addition to its cheeses, sells Parkay margarine, Philadelphia Brand cream cheese, Miracle Whip toppings and Velveeta cheeses.

Philip Morris, which owns General Foods as well as the world's largest tobacco operations, reached an agreement Sunday to buy Kraft for $13.1 billion.

Grand Metropolitan P.L.C., a British conglomerate, bid $5.2 billion for Pillsbury. Pillsbury sells ``Poppin' Fresh'' dough products, Green Giant vegetables, Haagen-Dazs ice cream and Van de Kamp's frozen foods, in addition to owning the Burger King restaurant chain.

But brand-name goods still do not sell themselves. …