It may seem like an unusual business combination but Kraft Heinz Co (NASDAQ: KHC), most notably known for ketchup and macaroni and cheese, could be eyeing an
acquisition of the beverage and snack maker, PepsiCo, Inc. (NYSE: PEP) — at least according to Bernstein's Ali Dibadj.
In a research report on Thursday, Dibadj argued that Kraft Heinz is expected to remain in the M&A hunt after an acquisition
of Unilever plc (ADR) (NYSE: UL) isn't going to
happen. The analyst suggested that Kraft Heinz would look at other larger-cap names in either the HPC (home personal care) or
food space.
Targets
Dibadj argued that within the HPC space, Colgate-Palmolive Company (NYSE: CL) could be a top target for Kraft Heinz to acquire given its relatively stable and
attractive top-line and possible benefits from cost cutting opportunities.
However, the analyst suggested benefits to Kraft Heinz's earnings per share from an acquisition of Colgate-Palmolive would be
limited and the company may be better off pursuing a food company.
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Specifically, Kraft Heinz could make a play to acquire PepsiCo's entire business
which could generate an earnings per share accretion of around 30 percent. Moreover, anti-trust concerns would be minimal as around
1.5 percent of PepsiCo's global sales overlap with Kraft Heinz.
Moreover, PepsiCo's CEO Indray Nooyi has opposed breaking up PepsiCo's business into various segments but the executive could be
open to an acquisition of the entire company.
Finally, the analyst noted that PepsiCo's plans to cut $1 billion in costs on a yearly basis since 2012 may start to slow and
this has been a crucial component of its high-single digit earnings per share growth, which may prompt PepsiCo to more seriously
consider an acquisition offer.
Latest Ratings for KHC
Date |
Firm |
Action |
From |
To |
Feb 2017 |
Susquehanna |
Downgrades |
Positive |
Neutral |
Feb 2017 |
Deutsche Bank |
Initiates Coverage On |
|
Buy |
Sep 2016 |
Argus Research |
Maintains |
|
Buy |
View More Analyst Ratings for
KHC
View the Latest Analyst Ratings
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