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Warren Buffett Throws Cold Water on Mondelez Deal Talk

August 11, 2015
Consumer Packaged Goods
Warren Buffett threw cold water Monday on the idea that he’d be involved in a deal for Mondelez International Inc.MDLZ +0.65% any time soon.
 
Mr. Buffett’s Berkshire Hathaway Inc.BRKA -0.08% revealed Monday that it agreed to buy Precision Castparts Corp.PCP +19.10% for about $32 billion, in what would be the conglomerate’s largest takeover ever.
 
The deal also represents one of the larger deals in the most active year for M&A since the peak year of 2007. It comes just months after the roughly $50 billion merger of Kraft Foods Group and H.J. Heinz, half of which was owned by Berkshire.
 
Appearing on CNBC after the Precision Castparts deal was announced, Mr. Buffett played down speculation that Kraft Heinz Co.KHC +0.44% could buy Mondelez, the snacks giant that was once called Kraft Foods Inc.
 
Last week, high-profile activist investor William Ackman unveiled a $5.5 billion stake in Mondelez, a giant bet that the maker of Oreo cookies and Ritz crackers will become the biggest target in a wave of consolidation reshaping the food industry. Kraft Heinz Co. was seen as a potential suitor.
 
Mr. Buffett said a deal with Mondelez, or any big food company, is unlikely in the near term. And he suggested that the pricetag that would be required to buy the company was prohibitive.
 
“At Kraft Heinz, we have our work cut out for us for a couple of years,” he said. “Frankly, most of the food companies sell at prices that it would be very hard for us to make a deal even if we had done all the work needed at Kraft Heinz.”
 
Those factors were among the reasons we listed last week in this space when we noted that it was premature to assume that a tie-up between the two was a done deal. In addition, we noted that Mr. Buffett hasn’t always been a fan of the way the company’s been run.
 
Traders are taking note of Mr. Buffett’s comments. Shares of Mondelez are down 2.4% to $44.99 in pre-market trading. Kraft Heinz is up 1.1% to $79.32.
 
By Chelsey Delaney and Erik Holm
 

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