There are similar stories for firms taken from Table 4-3, which lists
the 20 best-performing stocks whether they have survived in their orig-
inal corporate form or have been merged into another firm. Thatcher
Glass was the second best performing of all original S&P 500 stocks be-
hind Philip Morris and was the leading milk bottle manufacturer in the
early 1950s. But as the baby boom turned into the baby bust and glass
bottles were replaced by cardboard cartons, Thatcher’s business sank.
Fortunately for Thatcher shareholders, in 1966 the firm was purchased
by Rexall Drug, which became Dart Industries, which merged with Kraft
in 1980 and was eventually bought by Philip Morris in 1988. An investor
who purchased 100 shares of Thatcher Glass in 1957 and reinvested the
dividends would have owned 140,000 shares of Philip Morris stock,
worth almost $13 million by the end of 2006!
OTHER FIRMS THAT TURNED GOLDEN
As the medical, legal, and popular assault on smoking accelerated
through the 1980s, Philip Morris, as well as the other giant tobacco
manufacturer, RJ Reynolds, diversified into brand-name food products.
In 1985 Philip Morris purchased General Food, and in 1988 it purchased
Kraft Foods for $13.5 billion, which had originally been called National
Dairy Products and was an original member of the S&P 500 Index.
Philip Morris completed its food acquisitions with Nabisco Group
Holdings in 2000.
Nabisco Group Holdings was the company the Kohlberg Kravis
Roberts & Co. (KKR) spun off in 1991 after taking RJR Nabisco private in
1989 for $29 billion, at that time the largest leveraged buyout in history.
Under our methodology for computing long-term returns, if a firm is
taken private, the cash from the buyout is assumed to be invested in an
S&P 500 Index fund until the company is spun off, at which point the
shares are repurchased in the new IPO.^6 RJ Reynolds Tobacco Co. had
previously absorbed six original S&P companies: Penick & Ford, Cali-
fornia Packing, Del Monte Foods, Cream of Wheat (purchased in 1971 by
Nabisco), Standard Brands, and finally National Biscuit Co. in 1985. All
these companies became top-20 performers in large part because of their
ultimate purchase by Philip Morris.
Also on the list of best-performing stocks is Richardson Merrell,
which was purchased by Procter & Gamble in 1985, and Flintkote, which
62 PART 1 The Verdict of History
(^6) If the firm remains private, the returns are assumed to accumulate at the same level as the S&P 500
Index.