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BMO Capital Thinks Kraft Should Consider Spinoff To Unlock Value


In a note released Thursday, BMO Capital analyst Kenneth Zaslow thinks Kraft (NYSE: KFT) should consider spinoffs to unlock shareholder value.

Zaslow goes on to say the environment for Kraft to consider asset spinoffs is optimal given current difficult macro/operating climate, especially in a low interest rate environment and with the existence of "natural buyers."

BMO lists companies that could be “natural buyers” for some of the business lines of Kraft:

  • Cheese business may be sought after by several suitors including Saputo
  • Refrigerated Meals business would fit well with Pilgrim's Pride
  • Coffee business appears to be “logical candidate” for Jacobs Douwe Egberts

Zaslow feels Kraft could realize $30 billion of value (70 percent of Kraft's current enterprise value) from businesses that represent $2.1 billion of EBITDA (less than 60 percent of its current EBITDA), by spinning off several divisions (cheese, refrigerated meals, coffee, Planters).

BMO Capital has an Outperform rating and raised its price target from $61 to $63.

Latest Ratings for KRFT

Apr 2015Stifel NicolausMaintainsBuy
Mar 2015CitigroupMaintainsSell
Mar 2015Canaccord GenuityUpgradesHoldBuy

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