Alternative Takeover Targets For Kraft Heinz

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I am quoted in a Smith Brain Trust article (Robert H. Smith School of Business, University of Maryland) on possible takeover targets for Kraft Heinz (NASDAQ: KHC).  After withdrawing its offer for Unilever (NYSE:UL, NYSE: UN) , Kraft Heinz may be considering the acquisition of Mondelez International (NASDAQ: MDLZ) or Colgate Palmolive (NYSE: CL).

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Colgate-Palmolive: The New York-based Colgate-Palmolive is smaller global player in household and personal care products and may have plenty to offer Kraft Heinz. 

It doesn’t have as many brands as Proctor & Gamble, but Colgate-Palmolive, with its namesake toothpaste, dish soap and other consumer products has a strong global presence. In fact, most of its business is outside of the U.S. “Colgate is very big in Latin America and that’s a whole new market that’s growing,” Kass says. 

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Among its other virtues, Kass says, is its size. Colgate-Palmolive, with its a market capitalization of only about $68 billion, would be “more acquirable.” 

In fact, Colgate-Palmolive’s stock surged Friday morning on news about a potential Kraft Heinz and Unilever deal. Investors were betting that Unilever, perhaps looking to avoid a takeover, might look to merge with Colgate-Palmolive as a white knight, making it more difficult and more costly for Kraft Heinz to make a deal.

And the stock has only added to those gains this week, on news that the Unilever deal wasn’t meant to be. “Colgate,” Kass says, “makes sense.”

An alternative play: Kass says Kraft Heinz might play it safe and stick to its earlier script of acquiring another food company.  If so, Mondelez International, the Illinois-based multinational snacks and beverage brand that was spun off from the current Kraft Foods in 2012, would be a likely candidate, he says

The company, with brands such as Oreo, Chips Ahoy!, Triscuit, Nabisco, Milka, Toblerone, Cadbury, Trident, Dentyne, and Tang powdered drinks, has a presence in about 165 countries, giving Kraft Heinz the geographical reach it needs. Mondelez has a market capitalization of about $68 billion.

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