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Kraft Heinz Unlikely To Buy Danone, Analyst Says

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Kraft Heinz Unlikely To Buy Danone, Analyst Says

The food sector could see a major M&A move amid pressure from an activist investor. Keith Meister's hedge fund Corvex Management owns a $400 million stake of the France-based company Danone and is could be behind a push to sell the company, the New York Post reported.

But Meister's campaign to help find a buyer for Danone may have taken a step back Monday after analysts at Credit Suisse suggested that Kraft Heinz Co (NASDAQ: KHC) won't be looking to buy the maker of yogurt products.

Danone's recent struggles may have "perked up" Kraft Heinz's attention, there are simply too many obstacles and drawbacks for a deal to be completed, Credit Suisse's Robert Moskow commented in a research report. One of the biggest hurdles to a deal would come in the form of "outrage" from France's media as Kraft Heinz would be targeting a "national jewel" like Danone.

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Also, Kraft Heinz has a reputation for implementing "savage job cuts," which adds another hurdle for the food giant.

Nevertheless, an acquisition of Danone by Kraft Heinz would be accretive to its earnings per share give it exposure to:

    1. A leading food brand in a growth category.
    2. Incremental international exposure.
    3. The ability to generate cost savings and scale.

Bottom line, while a deal could be accretive to Kraft Heinz's earnings, the political clout around a deal occurring may be too big of an obstacle for the time being.

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Image Credit: By Szanand, CC BY-SA 3.0, via Wikimedia Commons

Latest Ratings for KHC

DateFirmActionFromTo
Sep 2020Wells FargoMaintainsOverweight
Sep 2020GuggenheimUpgradesSellNeutral
Jul 2020Morgan StanleyMaintainsEqual-Weight

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