3G in talks over $40bn Kraft deal
Kraft cheese productsKraft cheese products for sale at a grocery store in New York©BloombergKraft’s portfolio of brands ranges from household consumer products and snack foods to beverages and condiments©BloombergFoil-wrapped Cadbury Creme Eggs©BloombergAn employee serves customers at Burger King in Marseille airport in southern France©AFPJorge Paulo Lemann, 3G Capital chief©BloombergAlex Behring, 3G Capital managing partner (left), speaks to reporters alongside Bill Johnson, HJ Heinz chief executive officer©Bloomberg
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3G Capital, the Brazilian private equity group that controls Burger King and Heinz, is in advanced talks to acquire Kraft Foods Group in a deal that could be worth as much as $40bn, according to a person close to the matter.
It is unclear whether the acquisitive Brazilian group, headed by Jorge Paulo Lemann, is planning to do a deal alone, or whether because of the size of the transaction it would require a partner. A merger with Heinz could also be considered.
3G has previously teamed up with Warren Buffett’s Berkshire Hathaway, whose firepower helped Burger King buy coffee chain Tim Hortons for $11.4bn last year. Berkshire also combined with 3G two years ago to acquire ketchup maker Heinz for $23.2bn.
Brazilian sage retains his top-table touch
Jorge Paulo Lemann and his partners at 3G Capital, Marcel Telles and Carlos Sicupira, may need an introduction outside of Brazil, but not in their home country.
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In Berkshire’s annual letter in February, Mr Buffett said that “we welcome the chance to work with them again” as he described 3G Capital as “marvellous partners” and praised it for its operational acumen.
Kraft shares jumped 16.5 per cent to $71.44 in after-hours trading on Tuesday following a Wall Street Journal report about a potential deal, giving it a valuation of about $42bn. At Tuesday’s official close Kraft was trading at $61.32, giving the company a market capitalisation of $36bn.
A deal with 3G — which has been searching for its latest target in the US for several months — could end up valuing Kraft at more than $50bn including about $9bn in net debt. However, a transaction could still fall apart.
Kraft’s portfolio of brands includes household consumer products from beverages to condiments to snack foods, including Kool-Aid, Grey Poupon, Philadelphia Cream Cheese, Planters and Cadbury chocolate.
Jorge Paulo Lemann©Bloomberg
Jorge Paulo Lemann
A takeover of Kraft would be the latest transformation of the food group, which was spun off from Altria in 2007. Under the leadership of then chief executive Irene Rosenfeld, Kraft acquired the UK’s Cadbury in a hostile deal in 2010.
The Cadbury deal provided the impetus for Ms Rosenfeld to break up the company in 2012 into a snacks-focused business called Mondelez, which she currently runs and which makes products such as Trident gum and Oreo cookies. Kraft Foods emerged as a North American groceries-focused business led by John Cahill, who has since served as chairman and added the chief executive role at the end of last year.
Over the past decade, Mr Lemann and 3G’s other Brazilian founders have spearheaded some of the largest deals in the global consumer industry.
Mr Lemann, a Harvard-educated former tennis champion who moved to Switzerland after gunmen tried to kidnap his children in the 1990s, is highly respected in his home country for his ability to improve the efficiency of multinationals and his eye for contrarian investment.
After the downfall of oil and mining tycoon Eike Batista in 2013, he now ranks as Brazil’s richest man with an estimated net worth of $25.2bn, according to Forbes.