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Cahillane led Kellogg's successful corporate break-up

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Analysts skeptical about potential buyers for Kraft Heinz ( KHC )

businesses

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Condiments business expected to outperform grocery

division

post-split

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Kraft Heinz's ( KHC ) grocery division faces challenges with

legacy

brands

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Kraft Heinz ( KHC ) struggles with high prices and shopper

backlash

By Jessica DiNapoli and Abigail Summerville

NEW YORK, Dec 17 (Reuters) - Kraft Heinz's ( KHC )

decision to tap Steve Cahillane - the dealmaker who steered

Kellogg through one of the packaged food industry's biggest

breakups - signals the ketchup maker may be positioning itself

for major asset sales as it pushes ahead with its own split,

according to bankers, analysts and a former executive.

Kraft Heinz ( KHC ) announced the CEO change while in the midst of

separating its more than 200 brands into two companies. Shares

of the Jell-O maker, among the worst performers in packaged

food, are down 19% this year, versus a rise of almost 3% in the

broader S&P 500 Consumer Staples index.

Former Kellogg CEO Cahillane, appointed to run Kraft Heinz ( KHC ) on

Tuesday, oversaw the separation of the Corn Flakes and Pringles

maker about two years ago, which later saw privately-held Mars

scooping up the faster-growing snacks division, Kellanova, at a

33% premium.

With Cahillane on board, Kraft Heinz ( KHC ) may be hoping to woo a

suitor for its sauces and condiments business, which is expected

to have higher margins than its grocery division, according to

analysts.

"It's clear they're signaling to the market and potential

buyers that they're in play," said Bill Johnson, the CEO of H.J.

Heinz until 2013, when it was taken private by Warren Buffett's

Berkshire Hathaway ( BRK/A ) and Brazil-based 3G Capital. "We have someone

who knows how to do these deals.

"It's (also) an acknowledgement the management team needed

upgrading. In case they can't sell the company, they need

someone who can operate it better than it's been operated,"

Johnson added.

SHOPPERS CUT BACK

Sales of packaged food in the United States have faltered as

shoppers cut back due to sky-high prices, and try newer brands

with less processing, hurting Kraft Heinz ( KHC ) and its rivals like

Conagra.

Kraft Heinz ( KHC ), created in a 2015 megadeal, however, has

particularly struggled with well-worn brands like Crystal Light

drinks, Lunchables meal kits and Kraft Mayo.

Cahillane will also lead Kraft Heinz's ( KHC ) condiments and

spreads business, which includes Heinz ketchup and Philadelphia

cream cheese, after the split, set to be finalized at the end of

2026.

That division is expected to command a higher multiple than

Kraft Heinz's ( KHC ) overall because of the higher margins, exposure to

international markets and potential faster growth. Kraft Heinz's ( KHC )

multiple lags peers including General Mills ( GIS ), Mondelez ( MDLZ )

and Conagra.

This year ushered in a crop of major deals for

consumer-facing companies like Kraft Heinz ( KHC ), which have faced

blowback from shoppers on high prices and wrestled with

increasing costs from tariffs.

The administration of U.S. President Donald Trump is also

smoothing the path for deal-making, in contrast to his

predecessor former President Joe Biden.

Huggies diaper maker Kimberly Clark ( KMB ) announced plans to

acquire Kenvue ( KVUE ), which markets pain reliever Tylenol,

for nearly $50 billion last month. European confectioner Ferrero

bought Kellogg's smaller cereal unit, W.K. Kellogg, for $3.1

billion earlier this year, another success for Cahillane.

To be sure, Max Gumport, a senior analyst at BNP Paribas,

said in a research note that he struggles to see logical buyers

for Kraft Heinz's ( KHC ) business after the split.

Kraft Heinz ( KHC ) failed to sell Oscar Mayer last year. It also

attempted to sell coffee brand Maxwell House.