May 242017

I am quoted in a article on the possibility of Kraft Heinz acquiring Colgate-Palmolive or Mondelez International.

Cook’s comments, reported by the New York Post, suggest there’s a strong possibility that a friendly deal for Colgate-Palmolive could be struck reasonably soon, said David Kass, a clinical professor at the University of Maryland’s business school who follows Buffett and his company, Berkshire Hathaway (BRK.A) . The New York-based company could be attractive to Kraft Heinz, 3G Capital or Berkshire, Kass said.

One possibility is Buffett and 3G partnering to finance Kraft’s purchase of Colgate-Palmolive for as much as $85 billion, a premium on the company’s current $65 billion market capitalization, Kass suggested.

“It would be consolidated into Kraft-Heinz, and 3G would bring in its own management team,” Kass said. “3G Capital would want to acquire it if it felt that it wasn’t efficiently run and if they thought they could introduce efficiency.”

That theory is buoyed by the fact that Buffett and 3G have worked together before — on the purchase of Heinz, which predated its merger with Kraft. The combined company also has some synergies with Colgate-Palmolive. Colgate garners a large percentage of its sales outside the U.S., and it could use its international distribution chain as a channel for Kraft-Heinz, which has a much smaller international presence.

 The merged companies would also benefit from some economies of scale with U.S. retailers that sell both Colgate’s household products and Kraft Heinz’s food and beverages.

“Mondelez’s effort to buy Hershey suggests that it may be interested in buying something else as a defensive measure, so that they may be more difficult for someone like Kraft Heinz to swallow,” Kass said. “Mondelez has more international exposure than Kraft Heinz and putting the two together would open up more markets abroad, while bringing more domestic markets for Cadbury.”

 Posted by at 9:15 am

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