Mondelez's Hankering for Growth Persists as It Brings Clif Bar Into the Fold; Shares Fairly Valued

On June 20, wide-moat Mondelez struck a $2.9 billion deal to acquire Clif Bar, beefing up its presence in the fast-growing well-being and sustainable snacking aisle (with the targeted firm boasting a 9% compound annual growth rate over the past 10 years). At 3.6 times sales, we think Mondelez is paying a fair price for a business that leverages its category expertise and vast resources, and we think opportunities for distribution expansion should manifest at home and abroad. However, representing just a low-single-digit percentage of sales, this tie-up fails to move the needle on our $63 fair value estimate; we suggest investors wait for a larger margin of safety before snacking on shares. We’ve not wavered on our thinking that Mondelez boasts a sound investment track record and solid balance sheet worthy of a Standard capital allocation rating.