Bill Ackman has found a new activist target in Mondelez International Inc (NASDAQ:MDLZ), in which his fund, Pershing Square, has just disclosed a 7.5% stake. The position contains around 120.27 million shares and will now allow the investor to engage in discussions with the company’s management and board of directors regarding the course of business and other issues. Knowing Ackman’s track record of activist campaigns, we might anticipate more details regarding Ackman’s plans in the near future. On the back of the news, the stock of Mondelez jumped by around 4%, but later retracted and currently trades around 0.80% in green.
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Following the disclosure of Pershing Square’s position (valued at roughly $5.50 billion), obvious rumors that succeeded are that Ackman would push for a sale of Mondelez International Inc (NASDAQ:MDLZ). Moreover, a potential buyer was named 3G Capital, which earlier this year acquired Kraft and merged it with Heinz. However, the news has not been confirmed so far. It should be also reminded that Kraft was spun-off from Mondelez in 2012. Following the merger, Kraft Heinz is privately owned by 3G Capital and Warren Buffett’s Berkshire Hathaway.
Ackman and 3G Capital have a long history of working together. Earlier this year, 3G played a key-role in the Tim Horton’s acquisition of Burger King and following the combination of the two companies, Pershing obtained an 18% stake in the new company as a former shareholder of Burger King. Moreover, in an interview in January, Ackman said that he invested a part of his personal wealth in 3G Capital, a Brazilian multi-billion dollar investment firm co-founded and run by Jorge Paulo Lemann.
The retraction of Mondelez International Inc (NASDAQ:MDLZ)’s stock later in the day shows market’s skepticism regarding a possible deal involving Mondelez in the near future. Its stock is up by 27% year-to-date and the company has been improving its performance and managed to beat the estimates with its latest financial results. For the second quarter, it posted a 9.2% annual decline in revenue to $7.7 billion, due to currency headwinds, while its EPS fell by $0.11 to $0.25. For the current year, Mondelez expects to deliver at least 2% revenue increase and double-digit EPS growth on a constant currency basis. The company also reiterated its income margin target to the range between 15% to 16% in 2016.
Investors might also be reserved about a possibility of a deal due to remembering a past experience of an attempt to consolidate the industry via a merger between Mondelez International Inc (NASDAQ:MDLZ) and PepsiCo, Inc. (NYSE:PEP). Nelson Peltz of Trian Partners had been trying to push for a combination of two companies, but dropped this idea after signing an agreement with Mondelez that gave him a seat on its board. However, Peltz kept boosting its stake in Mondelez and held 48.02 million shares at the end of March. Meanwhile, the company has been cutting costs and improving its financial situation. Therefore, Ackman would have to come up with some strong arguments if he tries to push for a takeover.
Overall, hedge funds are not so attracted to Mondelez International Inc (NASDAQ:MDLZ). At the end of March, 65 funds from our database held some $6.11 billion worth of stock, which is only slightly higher than the new position initiated by Ackman. Aside from the aforementioned Trian Partners, other shareholders with notable stakes include Andreas Halvorsen’s Viking Global and Boykin Curry’s Eagle Capital Management, which owned 23.97 million shares and 21.54 million shares respectively.
If Ackman is indeed planning to push for a sale of Mondelez International Inc (NASDAQ:MDLZ), he might face some strong opposition, probably as strong as in the case of Allergan. Pershing Square also has some background when it comes to investing in food companies. Aside from its investment in Burger King, earlier this year, Pershing Square purchased a stake in London-listed Nomad Foods, whose stock jumped by more than 95% year-to-date following its acquisition of Igloo, the largest producer of frozen foods in Europe.
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