Pet, a producer of specialty packaged foods including such brand-name products as Old El Paso Mexican foods and Progresso soup, may soon find itself in another buyout deal--if some takeover investors are right. Pet was spun off to shareholders of the conglomerate Whitman in 1991. Whitman first acquired Pet in 1978 when Whitman was known as IC Industries. But as part of a restructuring, Whitman got rid of Pet. So what's next for the foodmaker?
Another takeover, say some pros, who insist that Philip Morris and Borden have been eyeballing Pet as a buyout target. In recent weeks, say these pros, several top Pet executives have had informal talks with some Philip Morris and Borden people.
Pet's stock fell from 19 in late November to 14 in mid-February because of the downscaling of earnings estimates by analysts who warn that PepsiCo could give Pet stiff competition. PepsiCo plans to market its Taco Bell products in grocery stores, competing with Pet's Mexican line.
Meanwhile, Pet's stock has rallied to 16. At that price, Pet is still way undervalued, says Mike Metz, Oppenheimer's chief investment strategist. But he thinks that "Pet would do better under the umbrella of a bigger company with tremendous marketing muscle such as Philip Morris." Pet is worth 25 in a takeover, says Metz. Both Pet and Philip Morris declined comment.