Kraft Heinz Jumps Most Since Unilever Talks Sent Shares SurgingBy
Kraft Heinz Co. is having its best day in the stock market since last February, when investors cheered on the potential blockbuster acquisition of Unilever for $143 billion.
When the deal fell apart soon afterwards, the ketchup giant faced an extended rough ride in the stock market, with shares dropping 44 percent through Wednesday. The decline wiped out more than $50 billion in market value.
But Thursday’s move shows investors may be warming to Kraft Heinz again: Shares jumped as much as 4.1 percent to $56.40 after the company delivered better-than-expected profit and management said it’s still eyeing acquisition targets. It’s the biggest intraday jump since Feb. 17, 2017, when the talks with Unilever leaked.
Kraft Heinz, controlled by Warren Buffett’s Berkshire Hathaway Inc. and the private equity firm 3G Capital, got a boost in the first quarter from a lower tax rate and aggressive cost cuts implemented by the management team from 3G.
The private equity firm is known for slashing expenses -- not for nurturing brands. So Kraft Heinz’s premium to its peers, which has evaporated since the Unilever takeover attempt, was based on the idea that another transformative merger was in the works. And while investors cheered the profit numbers on Thursday, the stock is still far off its record high of $96.65.
Chief Executive Officer Bernardo Hees addressed acquisition speculation on the earnings call Wednesday night. He noted that valuations of competing food companies have fallen in recent months as consumer-staples stocks face pressure.
“We look at those things that we can own and create value from longer-term,” Hees said. “We do believe that valuations are definitely more attractive today, even if you think about relative valuations. If the price is right, we believe we can move when we do find a situation that two plus two is more than four.”