The Brazilian private-equity firm 3G Capital is said to be in talks to buy Kraft Foods Group and merge it with H.J. Heinz – the food processing firm acquired by Berkshire Hathaway and 3G Capital for $23 Billion in 2013.
A Bloomberg report, citing one person familiar with matter, said that the deal could be announced this week.
Kraft has a market value of about $36 billion based on Tuesday’s close at $61.32. However, there has been no official word on exactly how much Kraft will sell for.
According to Thomson Reuters data, the company had 588.13 million shares outstanding as of March 2. Shares outstanding refers to all the shares a company has issued.
Is Kraft next on the list? 3G Capital has been “eagerly looking” for more acquisition targets.
Since 3G and Berkshire Hathaway acquired Heinz and 3G-owned Burger King Worldwide Inc purchased Tim Hortons Inc, investors have been speculating what company will be snapped up by the Brazilian investment giant next.
Kraft earnings hit by a shift in consumer preferences
In 2014, Kraft’s earnings dropped by 62% to $1 billion and revenue was flat at $18 billion. It is believed that this decline was mainly caused by a shift in consumer preferences towards less processed local grown food, in addition to being hit by higher commodity costs.
Kraft CEO John Cahill, who replaced Tony Vernon, said in December that he would “take a fresh look at the business.”
Kraft’s core businesses are in beverage, cheese, dairy foods, snack foods, and convenience foods. Its flagship brands include Kool-Aid, Cadbury, Maxwell House, Oscar Mayer, Philadelphia, and Jell-O.
It is unknown how 3G Capital plans on turning Kraft around
Nobody yet knows exactly how 3G plans on turning the company around to boost sales.
When the private-equity firm partnered with Warren Buffett to buy Heinz, it carried out an extensive cost-cutting plan, involving shedding jobs and shutting down plants.