The Illinois-based Mondelez International (NASDAQ:MDLZ) is having talks with Kraft Heinz over a takeover bid, according to reports in the media. The Mondelez stock jumped up sharply late last week on these reports as the market reacted positively to the news that two large food companies might be coming together. The stock went up by as much as 12 percent at one time. But the stock has remained around $45 since the start of the year. The Kraft-Heinz stock too went up by about 3 percent.
Mondelez International has rejected these claims, though, claiming that they are not talking with Kraft Heinz. A spokesman said they do not like to comment further on market rumors. Kraft Heinz too declined to make any comment. But many observers are skeptical of this denial.
Mondelez is a confectionery, food, and beverage giant that owns many billion-dollar brands such as Chips Ahoy!, Oreo, Nabisco, Belvita, TUC, Club Social, Terry’s, Marabou, Chiclets, Halls, and Tang powdered beverages among others. Kraft Heinz (NASDAQ:KHC), on the other hand, came into existence with the merger of Heinz and the Kraft Foods Group. Warren Buffet’s Berkshire Hathaway has 26.8 percent holding, making them the largest shareholder. 3G Capital also owns 24.2 percent. Each of their 13 brands has annual sales of $500 million or more.
Both 3G Capital and Berkshire Hathaway have been trying to increase their holdings.
It was the economic magazine from Switzerland, Bilanz, which first reported that the two businesses are in talks. Bloomberg News also reported this, citing the Bilanz.
Mondelez Cost-Cutting to Become More Profitable
Though Mondelez denies these claims, but there could be some truth in this. After all, it used to be one company before. Mondelez and Kraft went their own ways in 2012. Since then, Mondelez has focused on selling off their assets to bring down costs and improve their profit margins. Their $3 billion program to save costs is likely to go till 2018.
Interestingly, Kraft-Heinz has also been trying to cut costs to improve profitability.
Grow Quickly, Or Sell Off
In June this year, Mondelez (NASDAQ:MDLZ) made a bid to acquire Hershey. However, the Hershey board rejected this bid unanimously. Industry observers are saying that there is pressure on the Illinois-based business to grow quickly, as they could themselves become a target of takeovers. For instance, investor William Ackman wants Mondelez to increase their revenues quickly or sell off to a business rival.