Mondelez mulls sale of European cheese, grocery businesses

Mondelez International Inc (earlier known as Kraft Foods) is exploring a sale of its European cheese and grocery business, which could be valued at around $3 billion, Reuters reported on Friday, citing people familiar with the matter.

Mondelez plans to separate its European cheese and grocery business prior to the sale and has hired investment banks Goldman Sachs Group and JPMorgan Chase & Co to seek buyers for the unit, the report said.

Its European cheese and grocery business include brands such as Philadelphia and regional favourites, Sottilette and El Casiero, and has annual sales of around $1.4 billion.

The move comes over a year after Mondelez agreed to split its coffee unit and merge it with that of rival DE Master Blenders 1753, forming a new entity to be called Jacobs Douwe Egberts. (See: Mondelez and D E Master Blenders to merge coffee business)

In July last year, Mondelez said that it would create a "stand-alone" European cheese and grocery business to focus on its fast-growing snacks business.

Mondelez has recently come under pressure from activist investor William Ackman who amassed a $5.5-billion stake in the company through his $20-billion hedge fund, Pershing Square Capital Management, in anticipation of the food company becoming a target of industry consolidation. (See: Pershing Square builds $5.5-bn stake in Mondelez)

Ackman, who had made bets on other food companies like McDonald's, believed that Mondelez either needed to raise its revenue and cut costs or put itself up for sale.

Mondelez was in trouble after another activist investor, Nelson Peltz, in 2012 took a board seat through his 3.1-per cent stake and started pushing for changes at the company.

Peltz played a role in the breakup of Kraft into Kraft Foods Group and Mondelez in 2012, following its $19.6-billion hostile takeover of Cadbury in 2010.

Mondelez has already introduced several cost-cutting measures, including shutting factories and "zero-based budgeting," which required managers to justify every expense in each new budgeting period.