Might Lemann Team With Buffett To Put Kraft(KHC) And Mondelez(MDLZ) Together Again?

Humans are nothing if not pattern recognition machines. Even in random data, we see patterns. So Bloomberg’s report that Jorge Paulo Lemann’s 3G is expected by some to be ready to do another large deal is no surprise. Never mind that the supposition is based on a mere two data points: two years separated 3G’s 2013 acquisition of Heinz and its 2015 merger with Kraft, which created Kraft Heinz(KHC). As two years have now passed, the logic goes, it is time for another.

Warren Buffett’s Berkshire Hathaway(BRKB) has acted as Lemann’s banker, financing the deals and owning a large piece of equity as a result. Speculation on their next big target has heated up. Among others, Mondelez(MDLZ), General Mills(GIS), Kellogg(K), Campbell Soup(CPB) and Coca-Cola(KO) have been named as potential targets.

Mondelez would be a particularly interesting target. In 2012 Kraft spun off its Global Snacks business, inexplicably calling it Mondelez.  At the time, Buffett was publicly critical of then-Kraft CEO Irene Rosenfeld’s spinoff plan and sold all of Berkshire’s stock in Kraft not long after. Rosenfeld is now CEO of Mondelez.

In 2015, Bill Ackman of Pershing Square Capital took a large stake in Mondelez and tried to push the company to reunite with its former parent, Kraft Heinz. Buffett downplayed such a transaction, saying “[a]t Kraft Heinz, we have our work cut out for us for the next couple of years.” With that couple of years up, the rumor mill is rampant again.

Rosenfeld seemed to dispel the notion of a deal, arguing that Mondelez is in the midst of a complex effort to improve margins.

Irene Rosenfeld says a more balanced approach to improving margins will ultimately lead to bigger returns for shareholders.

“We’ve been walking and chewing gum at the same time,” Rosenfeld said. She declined to discuss whether the maker of Cadbury and Oreos, a long-rumored target for 3G, has been approached about combining with Kraft Heinz.

Walking and chewing gum at the same time! Impressive!

As long as 3G is successful at growing profitability at its growing empire and Buffet’s cash horde continues to grow, the speculation will go on. We view a remerger as unlikely, but would not be surprised to see another partnership between Lemann and Buffett in the not too distant future.

Disclosure: The author owns shares of BRKB and enjoys eating deep fried Oreos

7 thoughts on “Might Lemann Team With Buffett To Put Kraft(KHC) And Mondelez(MDLZ) Together Again?

  1. Spin Doctor

    @This Here Ninja

    Yes, there were reports of 3G raising a massive amount of money (something like $8-10b) in early November last year. You would think Bloomberg would have mentioned that fact, since it certainly sounds better than merely ‘it’s time’ because it’s been 2 years. I am not sure that was ever verified though.
    I can’t find a source, but I seem to recall 3G’s approach is to raise money for specific transactions and not just a general buyout fund.

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