Kraft Heinz (KHC) Said to be Considering Takeover of Colgate-Palmolive (CL) - Source

May 17, 2017 12:05 PM EDT

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Kraft Heinz (Nasdaq: KHC), the deal-hungry food manufacturer that in February gave up on its plan to acquire Unilever (NYSE: UL), is considering a takeover of Colgate-Palmolive (NYSE: CL). According to a person claiming to have knowledge of the matter, Kraft has lined up tens of billions of dollars from multiple banks to help finance an acquisition of the maker of toothpastes that could value it at up to $90 billion.

A takeover of Colgate, which has a current enterprise value of nearly $70 billion, would be the largest M&A transaction this year and transformative for the consumer space. It would also be a massive undertaking and a clear shift for the mostly food-focused Kraft, though not a total surprise to investors given its interest in Unilever and recent comments from management.

Speaking on the company’s Q1 conference call, CFO Paulo Luiz Araujo Basilio pointed out that Kraft, which is backed by Warren Buffett’s Berkshire Hathaway and 3G Capital, wants to own brands it would be happy owning for the long run, brands with strong equity, strong relative market share, and brands that can travel.

“I think at the end of the day that these two segments of the consumer product goods are very similar,” Basílio said in response to an inquire about possible acquisitions outside of food, “and that's the reason why you see also many companies operating brands for consumers, sometimes food, sometimes personal care, sometimes healthcare.”

Yesterday the New York Post reported that Colgate-Palmolive’s CEO signaled it would be open to selling the company for $100 per share. Unilever and Johnson & Johnson (NYSE: JNJ) were mentioned as other possible suitors.

Kraft Heinz declined to comment on the rumor. Colgate-Palmolive hasn’t responded to a request to comment.



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