Boston, MA 05/08/2014 (wallstreetpr) – Mondelez International Inc (NASDAQ:MDLZ) has drawn out a plan, where it will carve out its coffee business to combine it with D.E. Master Blenders 1753 of Europe so as to position as a formidable opponent to Nestle SA in the budding coffee market space.
Form A New Joint Venture
As per the deal announced on Wednesday, Mondelez International Inc (NASDAQ:MDLZ) will combine its coffee portfolio, which includes Gevalia and Jacobs, with that of the Dutch company’s brands like Pilao and Douwe Egberts,in order to form a joint venture called Jacobs Douew Egberts. In exchange of which, Mondelez will get to keep $5 billion in cash along with a 49% interest in the new joint venture. The combined venture is expected to generate over $7 billion revenue annually, according to the representatives. Master Blender’s Chairman, Bart Becht, will take the role of chairman in the new venture.
Part Of Restructuring
The deal forms a part of Mondelez International Inc (NASDAQ:MDLZ)’s broader streamlining strategy, which aims at reducing costs and shifting focus on snacks business. The company said on Wednesday that it has budgeted an amount of as much as $3.5 billion that is to spend by 2018 towards covering severance payments and other expenditures relating to its effort to slash down $1.5 billion from the annual budget.
Decreased consumer spending has of late impacted food companies like Mondelez and others, which have been trying hard to maintain profitability through aggressive cost cuts, closure of underutilized properties and shifting focus to core products. On Wednesday, the company reported a net profit fall of 72% to $150 million during the period ended on March 31. While Operating profit climbed 1%, the revenue dipped 1.2% to $8.64 billion. Mondelez International Inc (NASDAQ:MDLZ) has slashed its full year outlook for net revenue growth to 3% from its earlier guidance of 4%, on account of prevailing weakness in emerging markets and lower coffee prices.
