Options Bulls Hunt Mondelez Payoff As Call Volume Hits Year High
By Callie Bost
(Bloomberg) — Mondelez International Inc., the foodmaker
whose 13 percent rally this year is four times as big as that
for the Standard & Poor?s 500 Index, is becoming a favorite of
options speculators.
Investors are probably betting Mondelez is ripe for
dealmaking as the food industry looks to reduce budgets,
according to Sachin Shah at Albert Fried & Co. Pressure for
these companies to combine has intensified after 3G Capital and
Warren Buffett?s Berkshire Hathaway Inc. announced plans in
March to buy Kraft Foods Group Inc. — which split from Mondelez
in 2012 — and merge it with H.J. Heinz Co.
?People in the industry are saying ?how do we compete
here??? said Shah, a merger arbitrage and special situations
analyst for Albert Fried. ?Everybody is looking to squeeze
costs and the way they squeeze costs is through acquisitions.
That?s why you?re seeing the speculation.?
In 2013, Trian Fund Management LP, which owns about 3
percent of the company, pushed for PepsiCo Inc. to buy Mondelez
and spin off its beverage business. Trian abandoned the proposal
after Nelson Peltz joined the Mondelez board in 2014.
Cost-Cutting
Optimism around the stock has surged as Mondelez has proven
its ability to grow income through reducing expenses, according
to Edward Jones & Co.?s Brian Yarbrough. Mondelez Chief
Executive Officer Irene Rosenfeld has pledged to cut $3 billion
of costs through 2016 as she works to expand profit margins.
On April 29, Mondelez posted first-quarter earnings and
sales that topped analysts? estimates as gross margins expanded
to the widest for any quarter since 2010. The stock has rallied
6 percent since then.
?People are jumping on board thinking they?re making
headway from an operating margin standpoint,? said Yarbrough,
an analyst at Edward Jones in St. Louis. He has a buy rating.
?As sales have rebounded and margins have expanded, people are
starting to buy into the story.?
The three most-owned Mondelez options are bullish calls
expiring June 19, Bloomberg data show. The contract with the
highest ownership has a $42 strike price, 2.4 percent above
Mondelez?s closing price on Wednesday.
Valerie Moens, a spokeswoman for Mondelez, declined to
comment on the options trading.