Is Philip Morris Hungry For Borden?

For a stock the Street is down on, Borden is doing just fine. When the maker of a wide variety of food products announced disappointingly flat second-quarter results on July 30, reaction was swift: A number of analysts cut their earnings estimates for `91 and `92 and slapped a sell recommendation on the stock.

Yet the shares escaped with nary a scratch. After falling from 35 to 33, Borden shot back to 35--not far from its 1991 high of 38. What's going on?

Takeover talk, that's what--with new scenarios featuring Philip Morris in the leading role. (The food, tobacco, and brewery giant has often been said to be looking for another big food-industry acquisition.)

One New York investment manager says "Borden is among the cheapest food companies around," given its wide range of food and specialty chemicals. Despite soggy earnings and a sour outlook for 1992, Borden has "the most upside potential in the food group," given the right management, says this pro. Its products include internationally known Borden dairy brands, plus Wise potato chips, New York Deli potato chips, Cracker Jacks, and Elmer's glue--all of which could use Philip Morris' marketing clout, he adds. Borden management has yet to maximize shareholder returns, he says, and "Philip Morris could certainly add value to Borden's lines." He puts Borden's takeover value at $50 a share.

PaineWebber analyst Manny Goldman, a close follower of Philip Morris, thinks the company is just about ready to make another major acquisition. Its cash flow, he says, would allow it to extract the full value of any food company and make it click. Philip Morris and Borden declined comment.

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