Just last month, it announced plans to shift some production from Chicago to Mexico, leading to 600 job cuts. Knowing Ackman’s track record of activist campaigns, we might anticipate more details regarding Ackman’s plans in the near future. In the most high-profile deal, Heinz, backed by Warren Buffett’s Berkshire Hathaway and Brazilian private equity firm 3G Capital, agreed in March to buy Kraft Foods in a $46bn deal.
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“3G is turning the food industry upside-down”, Brian Yarbrough, an analyst at Edward Jones & Co., said by phone.
Activist entrepreneur Bill Ackman is spending roughly $5.5 million to get a 7.5 percent risk in Mondelez global Inc. For example, a lot of large and small investors followed Ackman into Allergan last year as he made a hostile bid for the company and even though the deal fell through following the sale of Allergan to Actavis, those investors still sold their shares at a significant premium.
Ackman is dabbling in the business of food takeovers as well.
Ackman’s Pershing Square Capital Management LP revealed its stake, which amounts to about 7.5% including options and forward contracts, in a statement late Wednesday night. His real involvement would be closer to writing a check. Peltz is a Mondelez board member.
In a post-3G world, that may not be enough. That’s not far off from profitability at Google and Apple, technology companies with much lower operating expenses.
In an earlier story in the WSJ that broke the news of Ackman’s position in Mondelez, Gaspasso, David Benoit and Liz Hoffman suggest that Kraft Heinz – formed earlier this year – is one potential buyer of the company.
Mondelez recently separated its coffee business into a joint venture now called Jacobs Douwe Egberts. “Kraft was expected to be a more unremarkable performer”, writes Annie Gasparro for the Wall Street Journal. The maker of Oreos and Wheat Thins is pursuing $3 billion in cutbacks and shifting production overseas. It’s going to take time to integrate the acquisition with Heinz and to pay down borrowings.
At the current share price of around $46.40, Mondelez is valued at about $80 billion. That may take about two years, Yarbrough said.
He supported a merger between PepsiCo and Mondelezin July 2013.
Such cost-cutting has become common for major packaged food companies, which are up against volatile economic conditions overseas and shifting tastes that favor foods marketed as fresher or more natural. Diageo Plc is one that could hold appeal.
Rosenfeld’s best argument for keeping Mondelez independent may be that there are few logical bidders.
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Craig Giammona contributed from New York.
