Dive Brief:
- Susquehanna’s Pablo Zuanic believes after Kraft Heinz was rebuffed in its attempt to merge with Unilever in February, going after Mondelez International or PepsiCo next makes sense, according to Barrons
- The analyst upgraded Pepsi from “neutral” to “positive” and raised his price target from $118 to $132. Recent news, including the the Kendall Jenner commercial, "all paint a picture of a company still struggling to set a new direction."
- Analysts have long-speculated that Pepsi's arch nemesis, Coca-Cola, will be the next AB InBev target.
Dive Insight:
Some analysts are predicting Kraft Heinz could consider Pepsi as its next acquisition target to take some of the sting out of failing to land Unilever earlier this year. With rumors also swirling that AB InBev is looking at possibly making a move on Coke, it's possible the two soda giants could no longer be standalone companies within a few years.
For Kraft Heinz, Bernstein's Ali Dibadj speculated in March that a takeover of Pepsi could generate an earnings per share accretion of 30% and not be affected by anti-trust concerns. Benzinga reported as Pepsi's cost-cutting efforts slow, a crucial component of its high-single digit earnings per share growth, it may be more inclined to consider a takeout.
The possibility of the world’s two biggest soda companies being run by new corporate leadership would have seemed unfathomable a decade ago, but with lagging soda sales due to consumers’ rising interest in better-for-you beverages, both companies seem ripe for a merger or acquisition.
Speculation about deals like this happen every year, and in the age of social media and gossip spreading at lightning speeds, many of these rumors turn out to be unfounded. Still, noted analysts seem to believe that both of these are strong possibilities, and it wouldn’t be surprising if the industry has some new players leading the way in the next few years.