CHICAGO-- Rumors of Kraft Heinz's imminent purchase of Mondelez continue to persist in the marketplace even though both companies refuse to comment or denied the news this week. Regardless, the stock market continued to react.
Shares of Mondelez spiked as much as 12% Wednesday in after-hours trading when Bloomberg News reported the merger talk, citing Swiss economic magazine Bilanz. The stock price of both companies continued to react in trading Thursday, posting gains early in the day. Mondelez was up 4.4% to $44.72, and Kraft had a slight gain of 0.8% to $85.01.
Mondelez and Kraft have a shared history dating back to 2012 when Mondelez was spun off from Kraft. Since then, there have been several rumors about sales or mergers of Mondelez, which has U.S. headquarters in East Hanover, N.J.
Mondelez activist investor William Ackman has been vocal in pushing for the company to sell itself. Mondelez also tried to purchase Hershey Co. earlier this year, but its bid was rejected.
The latest rumors started when Bloomberg News picked up a report from the Swiss magazine. Bilanz said an unnamed "very well-informed source from the food industry" reported that Kraft Heinz, backed by shareholder 3G Capital, was close to a deal to take over Mondelez. The magazine said Berkshire Hathaway would "probably" co-invest with the Brazilian private equity firm, as it did when the two companies brought together Kraft Foods and H.J. Heinz to form Kraft Heinz.
In June, the Hershey Co. board of directors unanimously rejected an offer from Mondelez to acquire the company. At the time, observers speculated Mondelez was seeking the merger in order to remain an independent company and not become a target for acquisition itself. Mondelez had been under pressure from Ackman to either grow revenue faster or sell itself to a rival. The company is currently in the middle of a $3 billion cost-saving program, which runs through 2018.
Kraft Heinz, based in Chicago, declined to comment.
Christopher Growe, an analyst with Stifel Financial Corp., said a Kraft transaction would have a value of about $90 billion and could be done primarily with debt on Kraft Heinz's balance sheet. The analyst said an acquisition would continue the consolidation strategy for Kraft and create the second-largest food company in the world, second only to Nestle. He further said Stifel believes the combination of Mondelez and Kraft would create the most profitable food company in the world.
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