Oscar Mayer offers peek at how M&A sausage is made
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Jennifer Saba
NEW YORK, May 16 (Reuters Breakingviews) -Being an Oscar Mayer wiener no longer guarantees love, as the storied brand’s long-running jingle professed. Multiple owners attest to just how fickle consumers, CEOs and shareholders can be. As Kraft Heinz KHC.O explores a sale of the hot-dog, bacon and bologna maker, it offers a glimpse into changing financial tastes.
The U.S.-based food giant hired advisers to help it consider offloading Oscar Mayer, according to the Wall Street Journal. It’s a sensible decision after $44 billion Kraft Heinz told investors earlier this year it was relegating the business to a lower shelf of no-growth, low profitability items to focus instead on stronger fare like Heinz sauces and Philadelphia spreads.
There was a time when processed meat was an inventive and more popular cuisine. Oscar Mayer and his brothers co-founded the eponymous company in 1883 and kept it independent for nearly a century before the sprawling General Foods paid almost $500 million to add it to its pantry. A few years later, as conglomerates made a comeback, cigarette peddler Philip Morris swallowed up General Foods for about $6 billion and later Kraft, too, as it sought to diversify away from tobacco.
Corporate winds eventually shifted again and housing Marlboros and Velveeta under one roof made less sense. Philip Morris spun off Kraft, which led to yet another Kraft carve-up. Then along came Warren Buffett’s Berkshire Hathaway BRKa.N with Brazilian buyout shop 3G Capital to make an $80 billion bologna and ketchup sandwich. It was as unappealing as such a combo sounds, and in 2019 Kraft Heinz wrote down some $15 billion of assets.
Kraft Heinz shares have tumbled by half over a decade while those of peers Mondelez International MDLZ.O and Unilever ULVR.L are up, respectively, by about a third and a half. It’s why boss Carlos Abrams-Rivera is trying to figure out how to turbocharge some brands and possibly jettison others.
Oscar Mayer generated an estimated $3.5 billion of net sales last year and about a 14% EBITDA margin, according to Jefferies analysts. Put those $500 million of earnings on roughly the same 9 times multiple at which Conagra Brands CAG.N trades and the division would be worth about $4.5 billion. Other sluggish food companies might see a way to slash more costs, but private equity firms also have stockpiles of cash to deploy. Larding Oscar Mayer with debt equivalent to about 4 times EBITDA to fund half a buyout should make it possible for yet another owner to bring home some bacon.
Follow @jennifersaba on X
CONTEXT NEWS
Kraft Heinz is exploring a sale of hot-dog, bacon and bologna maker Oscar Mayer, which could be acquired for between $3 billion and $5 billion, the Wall Street Journal reported on May 13, citing unnamed sources.
Bank of America and Centerview Partners are advising the parent company on the potential transaction, the newspaper added.
Graphic: Hot dogs and lunch meats lose their appeal https://reut.rs/4bnVjJ0
Graphic: Kraft Heinz's shares lag its peers Kraft Heinz's shares lag its peers https://reut.rs/4bbtZ0l
Editing by Jeffrey Goldfarb and Sharon Lam
免責聲明: XM Group提供線上交易平台的登入和執行服務，允許個人查看和/或使用網站所提供的內容，但不進行任何更改或擴展其服務和訪問權限，並受以下條款與條例約束：（i）條款與條例；（ii）風險提示；（iii）完全免責聲明。網站內部所提供的所有資訊，僅限於一般資訊用途。請注意，我們所有的線上交易平台內容並不構成，也不被視為進入金融市場交易的邀約或邀請 。金融市場交易會對您的投資帶來重大風險。
所有缐上交易平台所發佈的資料，僅適用於教育/資訊類用途，不包含也不應被視爲適用於金融、投資稅或交易相關諮詢和建議，或是交易價格紀錄，或是任何金融商品或非應邀途徑的金融相關優惠的交易邀約或邀請。
本網站的所有XM和第三方所提供的内容，包括意見、新聞、研究、分析、價格其他資訊和第三方網站鏈接，皆爲‘按原狀’，並作爲一般市場評論所提供，而非投資建議。請理解和接受，所有被歸類為投資研究範圍的相關内容，並非爲了促進投資研究獨立性，而根據法律要求所編寫，而是被視爲符合營銷傳播相關法律與法規所編寫的内容。請確保您已詳讀並完全理解我們的非獨立投資研究提示和風險提示資訊，相關詳情請點擊 這裡查看。
