The Kraft Heinz Company

Consumer Goods | United States

$70

WSD Target Price

--%

Annualized Return Since Publication

-$0.0B

Target Equity Value (Δ)

Source: Bloomberg end of day market data; not adjusted for dividends (June 18, 2018).

Returns assume a long investment position on the date that WSD Capital Management published its thesis, and an exit on the date that the WSD Target Price is realized.

Returns do not reflect any fees, expenses or taxes.

The returns are hypothetical and do not reflect the actual results of WSD Capital Management’s investment activities, nor is it necessarily indicative of future results of WSD Capital Management’s investment activities.

Summary

The Kraft Heinz Company (“Kraft Heinz”) is the fifth-largest food and beverage company in the world. Its products include condiments and sauces, cheese and dairy products, meals, meats, refreshment beverages, coffee, and other grocery products.

Kraft Heinz was formed in 2015 through a $46 billion merger and is run by executives from 3G Capital Partners, a New York-based Brazilian private equity firm.

On April 23, 2018, Berkshire Hathaway’s Warren Buffett stepped down from the board of Kraft Heinz, the food and beverage company in which Berkshire Hathaway owns a 27 percent stake.

WSD Capital Management announced its investment in Kraft Heinz on June 18, 2018. Kraft Heinz’s stock has declined around 21 percent in 2018 as the consumer packaged foods industry has come under pressure from changing tastes, new brands and private-label packaged foods.

A key tenet of Kraft Heinz’s strategic focus has been on driving efficiencies, targeting more than $1.7 billion in savings over the past few years. We believe that periods of change increase the pressure for consolidation, despite the fact that investors are growing increasingly skeptical of Kraft Heinz’s ability to make a transformative acquisition.

In 2017, Kraft Heinz made a $143 billion bid for Unilever, but the negotiations fell apart after Unilever rejected the approach.

As evidenced by its interest in a tie-up with Unilever, Kraft Heinz is likely to act as a consolidator and explore deals that extend outside its core packaged food focus, given that Unilever generates more than half of its sales from its household and personal care operations.

We have high confidence that Kraft Heinz is positioned to outperform its peers as it uses its merger and acquisition expertise to boost earnings as the consumer packaged foods industry transitions from a growth to mature stage.

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