The Kraft Foods – Mondelez Spin-Off: Frequently Asked Questions
- Joshua M Brown
- October 3rd, 2012
Today Kraft Foods (KFT) spins off its global snack business, Mondelez Foods, to investors as a separate publicly traded company under the ticker MDLZ.
“Why are they doing this?”
Because when you’re as big as Kraft Foods, you get bored and run out of things to do. You certainly can’t grow any larger so the best you can do to try to create value is financial engineering in the form of share buybacks or unlocking value by de-conglomerizing. Even if we all know that eventually, you’re just going to buy that spun-off subsidiary back one day.
“Which is which, by the way?”
Great question. Kraft will represent brands like Nabisco and Oscar Meyer ad Planters, it will focus predominantly on poisoning North Americans through its grocery outlets. Mondelez will represent the $32 billion global snacks business and encompass such billion-dollar brands as Oreo, Cadbury and Trident. It will focus on exporting our poisonous processed foods to nations with lower obesity rates throughout Europe and the developing world in the hopes that their consumption habits will catch up to ours. Got to hit those gross margins each quarter, am I right?
“Mondelez is the lamest name ever.”
Okay, that’s not really a question, more of a declaratory statement. But I guess I’ll just tell you that Mondelez is a Spanish word that can be loosely translated as “Delicious World.” So it makes sense even though, yes, it kind of sucks. Reminds me of when Phillip Morris changed their name to Altria to escape all the negative publicity about all the class action lawsuits and cases. And then we all realized that Altria is actually an anagram for “A Trial” when you unscramble the letters. Dumbasses.
“Do you like either of these stocks as an investment?”
I haven’t looked closely at either just yet. It’s important to remember that spin-offs actually tend to do really well over time, so maybe this one will as well. But processed foods disgust me. George Carlin once said that he stopped eating processed foods as soon as he started picturing the people who were doing the processing. Personally, I think the more interesting opportunities will come from the more healthful or natural brands that are taking share. I’m kicking the tires of things like Annie’s (BNNY) and Smart Balance (SMBL) instead.
“You’re awesome, thanks for answering my questions!”
Again, not really a question, but I appreciate it. That’s what I do.
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.