Activist investor William Ackman has built a stake worth about US$5.5 billion in Mondelez International Inc., the maker of Cadbury chocolate and Oreo cookies.
The share purchases are seen as Ackman’s attempt to push the company to boost earnings or sell itself, Reuters reported.
Mondelez has already taken steps to boost its operational performance, including shutting factories and shedding businesses.
It has also set a share buyback of up to US$13.7 billion, but analysts sat Ackman probably wants more.
“We suspect Mr. Ackman’s primary goal is to have Mondelēz sold,” JPMorgan analyst Ken Goldman wrote in a note.
A slowdown in growth for the global packaged food industry has sparked a wave of consolidation as companies try to cut costs, boost efficiency and gain scale.
However, Mondelez’s shares — which initially jumped on news that Ackman’s Pershing Square Capital would become the company’s biggest shareholder — were up less than 1 percent in early trading amid doubts about whether a buyer could be found.
At the current share price of around US$46.40, Mondelez is valued at about US$80 billion.
Some analysts mentioned newly formed Kraft Heinz Co. and PepsiCo Inc. as potential buyers.
JPMorgan’s Goldman, though, said Kraft Heinz backer 3G Capital might be reluctant to make another acquisition so soon after its US$46 billion deal to combine Kraft and Heinz.
And with Mondelez trading at 18 times EBITDA, PepsiCo would also find it “challenging” to buy Mondelez, he said.
Pershing Square gave no hint of its intentions on Thursday, saying only in a filing that it believed Mondelez’s shares were undervalued.
Ackman, one of America’s most successful investors, joins fellow activist Nelson Peltz as an investor in Mondelez, which reported its seventh straight drop in quarterly revenue last week.
Largely at Peltz’s urging, Mondelez is in the midst of a plan to cut about US$3.5 billion in costs by the end of 2018 and has set a target of an adjusted operating margin of 15-16 percent in 2016.
That compares with 12 percent in 2012, before Peltz took stakes in Mondelez and PepsiCo and agitated for them to merge — a demand he dropped after he gained a seat on Mondelez’s board.
– Contact us at [email protected]