Favorite Brands Still Looking For More Sweet Deals

Favorite Brands International, which eight months ago acquired Kraft’s caramels and marshmallows and recently gobbled up a small confections firm, is stalking two other major deals.

Sources report Favorite has been involved in discussions to acquire prominent Chicago candymaker Farley Foods or Sathers Inc. of Round Lake, Minn., or both of the privately held confections companies.

Discussions are said to be at an advanced stage, but whether either of the deals will be pulled off remains to be seen.

Al Bono, chief executive of Favorite, a Lincolnshire, Ill.-based firm formed last fall for the Kraft deal, indicated his company was negotiating acquisitions but declined further comment, including being specific about which companies Favorite might be interested in.

Bono, however, said that Favorite recently had acquired Kidd & Co., a family-held manufacturer of marshmallows, most for private labels.

Kidd, with annual sales of $35 million at manufacturer prices, has plants in Ligonier, Ind., where it has headquarters, and in Henderson, Nev., outside Las Vegas.

The Nevada facility will help Favorite’s production needs for the West, Bono said.

Farley, perhaps a $300 million-plus sales firm that is headed by William H. Ellis, has long been coveted for acquisition by rivals, including RJR Nabisco’s Planters LifeSavers subsidiary a few years ago.

Sathers also generates top volume - exact figures are unavailable - in buying bulk candy and packaging it under its name and for private labels to sell at retail.

The Kraft acquisition brought to Favorite confections that are produced in Kendallville, Ind., and total $160 million in annual sales. Favorite’s impending deals, of course, would make it an even bigger player, and there are rumors that it might also be interested in Leaf Inc.

Favorite has deep pockets, or as Bono says, “We’ve got (private) investors who view the confection business as having great growth opportunities.”

Some of the stocks that moved substantially or traded heavily Friday.

NYSE

Ford Motor Co. fell 62-1/2 cents to $31.25.

Ford said its U.S. sales of cars and light trucks in June declined 2.4 percent from a year earlier, the sharpest drop reported among the Big Three U.S. auto makers. Both General Motors and Chrysler earlier in the week reported slower June sales.

Southern Pacific Rail Corp. fell 62-1/2 cents to $27.12-1/2.

Union Pacific Corp. fell $2.37-1/2 to $70.37-1/2.

The federal Surface Transportation Board’s approval Wednesday of the $3.9 billion merger of these two companies, which is subject to a written order expected by Aug. 12, was a major victory for Union Pacific, which lobbied heavily for the plan. In a July 3 press release, Southern Pacific Rail said the firms would be permitted to close the merger 30 days after the final order is issued.

Hewlett-Packard fell $1.87-1/2 to $92.25.

Goldman Sachs & Co. removed the computer maker’s stock from its recommended list and downgraded it to “market outperformer,” citing a soft European computer market. Morgan Stanley downgraded the stock earlier this week.

NASDAQ

KLA Instruments fell 37-1/2 cents to $20.75.

According to this week’s Business Week, Scott Black, president of Delphi Management, thinks the company is in good position to weather the turbulence of the technology market.

Astea International rose 50cents to $9.25.

The stock was recovering from a 14-1/4-point drop Wednesday after the interactive-software maker warned it would post a quarterly loss.