Mondelez International taken off Fitch Rating negative watch list

Fitch Ratings has removed Mondelez International’s immediate risk of credit rating downgrade, despite debts of US$18.7 billion. The removal of Mondelez from Fitch’s negative watch-rating list follows the European Commission’s announcement on 5 May that it has approved Mondelez International’s merger with D.E Master Blenders 1753. The announcement from the European Union has meant D.E Master Blenders 1753 and Mondelēz International will combine their coffee businesses to create Jacobs Douwe Egberts (JDE). The approval came under the condition that Mondelez would sell its Carte Noire business in France, and that DEMB would sell its Merrild brand in Denmark and the Baltics, and license the Senseo brand to a third party in Austria. This was a result of the commission's concerns that the joint venture would bring together concumer brands which had previously been competing against one another. Had this come about remaining companies could have struggled to exert enough competitive pressure to avoid coffee price rises. JDE is projected to become a world leading pure-play coffee company with annual revenues of more than US$5.7 billion and an international workforce of approximately 12,000 people. JDE’s entities now comprise Jacobs, Tassimo, Moccona, Senseo and L'O. Acorn Holdings B.V. (AHBV), owner of D.E Master Blenders 1753 (DEMB), will hold a majority share in JDE and will have a majority of seats on the board. Current DEMB Chairman, Bart Becht, has been appointed as chair. AHBV is a member of the JAB Holding Company, a privately held affiliated group of entities which has a controlling stake in Peet’s Coffee and Tea and Caribou Coffee Company, among its portfolio. According to the Shareholders' Agreement, JDE will provide Mondelez at least US$198 million, pro-rated for the first year with at least US$227 million for the second year, at least US$255 million for the third year and 40 per cent of operating profit thereafter. Fitch Ratings said that if the new company leverages consistently in the mid to high range, with Free Cash Flow above US$1 billion annually this could support a positive rating action, however, it is not anticipating this in the near to intermediate term.

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