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Mondelez's (MDLZ) Chipita Buyout to Boost Presence in Europe

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Mondelez International, Inc. MDLZ has been focused on driving growth through meaningful acquisitions. Progressing further on these lines, the company recently announced a deal to buy Chipita S.A., which is a major producer of sweet and salty snacks in Central and Eastern Europe. The deal, worth nearly $2 billion, is likely to be funded through cash and new debt issuance. Markedly, Mondelez anticipates the acquisition to boost its earnings per share (EPS) immediately from the closing date.

The addition of Chipita, which generated revenues of nearly $580 million in 2020, is likely to introduce a new category to Mondelez’s portfolio, alongside strengthening its presence considerably in the fast-growing markets of Central and Eastern Europe. Incidentally, Mondelez is likely to benefit from Chipita’s distribution network capacities in the abovementioned regions. Also, this buyout will provide co-branding and innovation opportunities, as it will get Mondelez’s renowned chocolate brands to additional categories.

We note that Chipita has been constantly gaining from its robust portfolio of croissant and baked snack brands such as 7Days, Chipicao and Fineti. Established in Greece, the company has been driving growth on the back of solid innovation and manufacturing capacities. Chipita’s products are delivered across more than 50 countries and produced in 13 manufacturing plants. This buyout will broaden Mondelez’s bakery portfolio, which will now include pastry, along with biscuits and cake, which in turn will help it cater to consumers’ burgeoning demand for this category.

Certainly, Chipita’s addition to Mondelez’s family is likely to complement the latter’s existing portfolio and offer solid growth opportunities in Europe and beyond.

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Mondelez on Track With Expansion

Mondelez has been keen on expanding in the fast-growing snacking category through acquisitions. In fact, the company has made solid moves in this regard, in 2021 itself. It has taken over a renowned sports performance and active nutrition brand — Grenade. Certainly, Grenade’s on-trend and tasty products position Mondelez to grow in the U.K. as well as other markets. Further, the company acquired Australia-based food company — Gourmet Food Holdings — which operates in the premium biscuit and cracker category.

Also, Mondelez completed the acquisition of Hu Master Holdings, the parent company of Hu Products on Jan 4, 2021. Notably, the acquisition of Hu provides further growth opportunities in chocolate and cross-category potential in crackers for Mondelez. Earlier, the company also acquired a majority interest in Give & Go (in April 2020), which is a pioneer in fully-finished sweet baked goods. Notably, Mondelez’s first-quarter 2021 net revenues increased 7.9%, driven by strong organic net revenue growth of 3.8% as well as increased sales from the Give & Go and Hu Master buyouts. The company witnessed robust demand in developed markets, while performance in the emerging markets continued to improve.

On its last earnings call, the company said that it expects momentum witnessed in the first quarter to continue through the year. Notably, it is seeing continued demand for snacks amid elevated at-home consumption. For 2021, Mondelez projects organic net revenues to increase more than 3%. Further, management anticipates adjusted EPS to grow in high-single digits at cc.

Clearly, the abovementioned expansion bodes well, especially at a juncture where consumers’ demand for snacks is high.

We note that this Zacks Rank #3 (Hold) stock has gained 19.1% in the past three months compared with the industry’s growth of 11.6%.

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