Will Kraft Heinz Buy Mondelēz’s Cheese and Grocery Business?
Will Mondelēz Divest Its Europe Cheese and Grocery Business?
As reported by Reuters on October 1, Mondelēz (MDLZ) may be looking at a sale of the Europe segment’s cheese and grocery business. A possible assets sale could raise an estimated $3 billion for Mondelēz (MDLZ), according to the report. However, it’s not yet certain that there will be a sale.
According to unnamed sources, the assets sought to be divested could find a buyer in either Kraft Heinz (KHC) or private equity investors. There has been no official statement from the companies involved.
Post-split agreements
In 2012, Kraft spun off its North America grocery business to form Kraft Foods Group. It also changed its name to Mondelēz. Kraft’s North America grocery business consisted of the following segments: US Beverages, US Cheese, US Convenient Meals, US Grocery, grocery-related categories in Canada, Meals and Desserts, and Enhancers and Snacks Nuts.
Mondelēz retained the global snack foods business consisting of Kraft Foods Europe and Developing Markets and the North America snacks and confectionery businesses.
According to the deal between Kraft Foods Group and Mondelēz at the time of the spin-off, Kraft Foods Group would have the right of first refusal should Mondelēz seek to dispose of these assets.
This July, Kraft Foods Group and Heinz merged to form the Kraft Heinz Company, a deal brought about by Warren Buffett’s Berkshire Hathaway (BRK-B) and private equity firm 3G Capital. In this situation, it’s likely that if Mondelēz decides to sell its European assets, it would offer them to Kraft Heinz before looking for other buyers.
Market reaction
Mondelēz was up 0.8% to $42.81 on October 1, 2015, the day news of a potential asset sale was reported. Kraft Heinz was up by 0.4% to $70.83. This compares to:
An increase of 0.2% in the S&P 500 Index (SPY) (IVV) (VOO)
An increase of 0.1% in the Consumer Staples Select Sector SPDR ETF (XLP)
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