BMO Capital Thinks Kraft Should Craft a Deal To Unlock Value

In a note out yesterday, BMO Capital analyst Kenneth Zaslow thinks Kraft KFT should consider spinoffs to unlock shareholder value. Mr. Zaslow goes on to say the environment for Kraft to consider asset spinoffs is optimal given current difficult macro/operating climate, especially in a low interest rate environment and with the existence of "natural buyers". BMO lists companies that could be “natural buyers” for some of the business lines of Kraft: -Cheese business may be sought after by several suitors including Saputo -Refrigerated Meals business would fit well with Pilgrim's Pride -Coffee business appears to be “logical candidate” for Jacobs Douwe Egberts Mr. Zaslow feels KRFT could realize $30b of value (70% of KRFT's current enterprise value) from businesses that represent $2.1b of Ebitda (less than 60% of its current Ebitda), by spinning off several divisions (cheese, refrigerated meals,coffee, Planters) BMO Capital has an Outperform rating on shares of KRFT, and raised their price target to $63 from $61.