tag:blogger.com,1999:blog-5389144729834496735.post7766789392497532241..comments2024-03-17T05:15:55.634-04:00Comments on The Brooklyn Investor: Mondelez International (MDLZ)Unknownnoreply@blogger.comBlogger7125tag:blogger.com,1999:blog-5389144729834496735.post-2814669429209140122015-08-11T11:01:15.444-04:002015-08-11T11:01:15.444-04:00That's an interesting idea, but I doubt it esp...That's an interesting idea, but I doubt it especially with the current CEO who is financially incompetent. Buffett says Rosenfeld is a great operating manager but financially incompetent; she sold the frozen pizza biz for 9x pretax profit and paid 13x EBITDA for cadbury, not a good trade. <br /><br />In that sense, Mondelez is run by sort of a one-armed boxer... imagine what MDLZ could be if the CEO could use both hands effectively. <br /><br />Anyway, Buffett shot down MDLZ in the short term, but I don't think Ackman meant (if he is even thinking about it) that KHC will take out MDLZ in the near future. I think he is probably looking 2-3 years out. <br /><br />If MDLZ is now trading at 14x post-3G earnings now, imagine what it might be trading at in 2-3 years if they get revenues up. <br /><br />And since MDLZ/KHC are similar in size, it may be a stock-for-stock merger in 2-3 years. That would take care of the size problem (need to fund such a large deal). <br /><br />So once they 3G the sh*t out of KHC, they can further enhance value by merging with MDLZ and doing the same there. I haven't worked out any numbers, but Ackman probably has. <br /><br />Anyway, I don't think anything has changed with the idea despite Buffett's comment and the press saying Ackman's idea was shot down. <br /><br />Plus, I wonder about the market pricing in 3G-like margins at all the food companies. As my analysis above shows, even MDLZ is trading at 14x P/E if you assume 3G-like margins, and these things typically trade at 20+ p/e... <br /><br />Anyway, we'll see what happens. kkhttps://www.blogger.com/profile/06299974418283948333noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-41903055420484894292015-08-10T23:13:31.888-04:002015-08-10T23:13:31.888-04:00Given Ackman's love for platforms couldn't...Given Ackman's love for platforms couldn't you flip this scenario and speculate the goal is to make Mondelez' a snack food acquisition platform? Hypothetically a little tough with their current debt levels, but actually bears a lot of similarity to Valeant in that regard.Anonymoushttps://www.blogger.com/profile/14404755417965187357noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-88803797448474954092015-08-08T06:57:19.607-04:002015-08-08T06:57:19.607-04:00Good point. I didn't for this to be an LBO an...Good point. I didn't for this to be an LBO analysis; just to illustrate that if someone can cut costs dramatically, this is not an expensive stock. <br /><br />What 3G is doing sort of feels like the four minute mile; something that sounds really amazing, impossible etc... but as some commentators have said, they have sort of raised the bar on corporate efficiency and corporations are moving in that direction. Still, most companies that announce zero-based budgeting measures seem to be moving incrementally so I guess it can only really be done by outsiders.<br /><br />Thanks for dropping by... kkhttps://www.blogger.com/profile/06299974418283948333noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-9278663262859593842015-08-08T06:54:04.208-04:002015-08-08T06:54:04.208-04:00If they can get back to growth, 20x should be easi...If they can get back to growth, 20x should be easily supportable... (at least)kkhttps://www.blogger.com/profile/06299974418283948333noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-15532263723625405872015-08-07T22:52:58.775-04:002015-08-07T22:52:58.775-04:00Sorry for the confusion, I was just questioning yo...Sorry for the confusion, I was just questioning your last paragraph about how MDLZ's current stock price allows 3G to acquire the company at 12-14x $3.70 eps. I don't think your math included the interest expense required for 3G to fund the acquisition to begin with so if you take that into consideration, eps is actually much lower than $3.70 and therefore the implied multiple is much greater than 12-14x. JetSetterhttps://www.blogger.com/profile/14472397836397026769noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-58802884469236496952015-08-07T22:18:49.183-04:002015-08-07T22:18:49.183-04:00Let's MDLZ could cut cost and get margins up t...Let's MDLZ could cut cost and get margins up to those 20% levels. That's 12-14x current earnings. Then what's a reasonable multiple to place on the business. Will it sell for 20 times then?Henryhttp://livingathome.weebly.comnoreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-43680104573684331012015-08-07T21:59:41.639-04:002015-08-07T21:59:41.639-04:00Thanks and great article. I also agree that KHC/3G...Thanks and great article. I also agree that KHC/3G may acquire MDLZ but not anytime soon as they are busy digesting Kraft. 2 quick questions on the $3.70 eps and ownership structure: <br /><br />1) Does the $3.70 include the acquisition premium and interest expense from the debt raised to fund the acquisition? If not, then the 12-14x pe is too low. <br /><br />2) one of the reasons that the 3G acquisitions and cost cutting work as successfully as they do is because they are the majority owners with over 50% stake and the rest of us are minority shareholders. The KHC and QSR deals were specifically structured in a way that 3G remained as majority owners post deal and 3G made sure of that by maximizing the capital structure through debt and Berkshire preferreds. So my question is, would they even be able to acquire MDLZ in a deal structure that will keep them as majority owners? I mean, you could only raise so much debt and preferreds before you have to raise common and dilute your stake. <br /><br />Lastly, I think there's some synergy opportunities between the transition agreement that Kraft and MDLZ signed before they split in regards to managing some of their products. I forget the details but Kraft can buy back the back rights to some products that are in MDLZ's portfolio after a specified date in the future. JetSetterhttps://www.blogger.com/profile/14472397836397026769noreply@blogger.com