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The Most Likely Targets For A Kraft Heinz Deal: Mondelez Or Pepsi

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The Most Likely Targets For A Kraft Heinz Deal: Mondelez Or Pepsi

Susquehanna’s Pablo Zuanic believes Kraft Heinz Co (NASDAQ: KHC) needs to look at an M&A deal, with the two most likely candidates being Mondelez International Inc (NASDAQ: MDLZ) and PepsiCo, Inc. (NYSE: PEP).

The analyst also believes a deal with PepsiCo would make more strategic sense for Kraft Heinz.

Zuanic upgraded the rating on PepsiCo from Neutral to Positive, while raising the price target from $118 to $132.

Thoughts On PepsiCo

“With investors apparently seeing MDLZ as the next likely KHC target, and The Coca-Cola Co (NYSE: KO) the next Anheuser Busch Inbev NV (ADR) (NYSE: BUD) target, PEP shares have lost visibility and now trade at a 25 percent discount to KO on apples-to-apples comps,” the analyst said.

Zuanic expressed optimism regarding PepsiCo’s franchise strength, initiatives to align its F&B portfolio with consumer health trends, as well as the increasing “optionality value” of a joint bid for the company from Kraft Heinz and Anheuser Busch.

The analyst pointed out that several issues suggest PepsiCo is still struggling to find a new direction, such as “the Kendall Jenner commercial, the Aspartame to-be-or-not-to-be zigzagging, the new, new, new alt low-cal cola (Pepsi Zero sugar),” among others.

There has also been some talk of PepsiCo acquiring Brazilian dairy company Vigor S.A.

Related Link: PepsiCo's 11-Day Trading Range Still In Tact

A Better Fit

Therefore, Zuanic believes PepsiCo might be more vulnerable than Mondelez International to a bid from Kraft Heinz, while stating PepsiCo would be a better strategic fit for Kraft Heinz due to its Foods/Snacks business.

On the other hand, PepsiCo might be a better fit for Anheuser Busche than Coca Cola, since PepsiCo has bottling operating in key geographies.

Latest Ratings for PEP

DateFirmActionFromTo
Apr 2020SunTrust Robinson HumphreyMaintainsHold
Apr 2020CitigroupMaintainsNeutral
Apr 2020Morgan StanleyMaintainsOverweight

View More Analyst Ratings for PEP
View the Latest Analyst Ratings

 

Related Articles (PEP + KHC)

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