Blog: Katy AskewKellogg takeover chatter cools

Katy Askew | 22 July 2016

Market speculation over a possible takeover of Kellogg surfaced this week, with the snacks-to-cereal maker linked to both Kraft Heinz and Coca Cola Co.

Rumours that Kraft Heinz – backed by 3G Capital – was in talks with Kellogg were based on tracking private planes from Battle Creek, where Kellogg is located, to Chicago, where Kraft Heinz is located. These were squashed when CNBC was able to confirm that no talks are under way – although the door has been left open to the possibility that Kraft Heinz could be looking to acquire part of the Kellogg portfolio.

Elsewhere, Coca Cola Co has also been linked to a potential Kellogg buyout.

SIG analyst Pablo Zuanic said that this made “little sense” unless it was being “used as a decoy for a bid for another food company”.

Coca Cola has itself been flagged as a potential takeover target for beer giant Anheuser-Busch InBev. However, management has some time to organise a defence given AB InBev will have its hands full completing and integrating its acquisition of SABMiller. Bulking up its portfolio and diversifying would be one way Coca Cola Co can protect itself against a future hostile move. And diversifying into food could also help boost the group's growth profile.

Zuanic suggested that would represent a “major strategic shift” but if the motivation was growth Kellogg would not be the prime candidate. ”If Coca Cola Co is indeed planning to diversify into the food sector... the rationale would be to improve the company’s growth profile. But if that is indeed the case, then there are better options,” he said.

The most obvious of these alternatives would be a counter bid for WhiteWave, whose management has backed a US$12.5bn takeover by Danone.

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