Wall Street is hotly speculating about which consumer group Kraft Heinz will set it sights on next, after its aborted bid for Unilever. No other potential target matches juggernaut Unilever’s $150bn price tag — yet plenty of possible blockbuster deals remain.
The FT has created a calculator showing the broad financial impacts of different takeovers. Use it to assess the best options for Kraft Heinz, using factors including levels of debt and equity to fund the deal.
While financial metrics are key to how Kraft Heinz will assess any dealmaking, the potential for cost cuts and strategic merits will vary for different targets and should be taken into consideration.
Colgate-Palmolive and Kimberly-Clark, for example, would provide a shift into the personal care and household products business. Mondelez, a snacks business, derives three-quarters of its sales from outside the US.
The audacious Unilever approach took the market by surprise. Another bold play very well could be coming. Wall Street watchers can be confident, however, that Kraft Heinz and it backers, 3G Capital and Warren Buffett, will not sit still.
About the data:
- Stock prices as at March 17, 2017
- Balance sheet figures as at December 31, 2016
- Hypothetical transaction assumed to close December 31, 2017
- Pre-tax cost of debt of 8 per cent
- Corporate tax rate assumed to be 35 per cent
- Earnings analysis assumes that 25 per cent of target company's annual overhead expense is eliminated
- Debt/EBITDA calculation does not include any estimated synergies
- €1 = $1.08 for Unilever conversions
- No purchase accounting adjustments
- Assumes no transaction or financing expenses
- 2018 earnings estimates from S&P Global Market Intelligence