Markets

Mondelez (MDLZ) Shares Rise on Reports of Another Spin-Off

Shares of Mondelez InternationalMDLZ rose around 3% on Friday, Oct 2, after a report by Reuters revealed the prior day that the company was planning to divest its European cheese and grocery business to allow it to focus on its core snacks operations.

The report said that Mondelez has hired investment banks Goldman Sachs and JPMorgan to find buyers for the unit which could be valued at $3 billion. The report also hinted that The Kraft Heinz Company KHC could be interested in buying the business.

Mondelez was previously known as Kraft Foods, Inc. and changed its name to Mondelez following the spin-off of its North American grocery business into a separate independent company, Kraft Foods Group, Inc. in Oct 2012. Kraft Foods, however, merged with H.J. Heinz Company this year to form The Kraft Heinz Company.

This year, Mondelez has been focussing on divesting some of its low-margin products/customers/businesses to concentrate on growth platforms and simplify the supply chain. In line with this argument, the company, in Jul 2015, divested its coffee business. The move also strengthened Mondelez's cash position and improved its margins by cutting supply chain and overhead costs. Mondelez's coffee business was merged with that of D.E Master Blenders 1753, to form a new Dutch coffee company called Jacobs Douwe Egberts. Mondelez received 3.8 billion euro in cash for the divesture and a 43.5% stake in the combined company. Acorn Holdings B.V., the owner of D.E Master Blenders, holds the remaining 56.5%.

In fact, Mondelez has for some time been divesting non-core underperforming businesses in order to streamline its operations. In 2013, the company divested its salty snacks business in Turkey, a confectionery business in South Africa and a chocolate business in Spain which, taken together, generated cash proceeds of $60 million. In the fourth quarter of 2012, the company divested the dinners and sauces grocery business in Germany and Belgium and a canned meat business in Italy which generated cash proceeds of $200 million.

Stocks to Consider

Mondelez carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the food sector are Cal-Maine Foods, Inc. CALM and Omega Protein Corporation OME , both sporting a Zacks Rank #1 (Strong Buy).

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CAL-MAINE FOODS (CALM): Free Stock Analysis Report

MONDELEZ INTL (MDLZ): Free Stock Analysis Report

OMEGA PROTEIN (OME): Free Stock Analysis Report

KRAFT HEINZ CO (KHC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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