Kraft Heinz Falls After Pulling Unilever Offer; Deutsche Says Buy The Dip

Deutsche Bank says buy the dip in Kraft Heinz Co KHC shares, which are in the red after it dropped its $143 billion takeover offer for Unilever plc (ADR) UL.

“Despite the implied upside reduction from here due to appreciation from the Unilever bid, we reiterate our Buy recommendation and view any near-term pressure on the shares due to the Unilever bid withdrawal as an ideal buying opportunity,” analyst Rob Dickerson wrote in a note.

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Dickerson’s Buy rating on Kraft Heinz is based on continued acquisition activity/synergy potential as cost savings start to cycle coupled with shareholder friendly (and smart) capital deployment.

The analyst said though the Unilever acquisition is “off the table,” the offer shows that Kraft will not slow its acquisition engine to move in to non-North America markets and non-food CPG categories.

Over the past three years, the average volumes for all of the large U.S.- centric large-cap food companies are under pressure with limited incremental operating profit and return on invested capital.

“Overall, we foresee larger scale consolidation for the entire sector, as savings start to cycle, placing synergies in the spotlight if volumes don't rebound,” Dickerson elaborated.

At last check, shares of Kraft Heinz fell 3.51 percent to $93.25. Dickerson has a price target of $103.