Mondelez to Sell Developed-Market Gum Arm to Perfetti for a Tasty Price; Shares Fairly Valued

After shopping its developed-market gum business for the past 18 months, wide-moat Mondelez finally announced it has inked a deal to sell its North American and European gum brands to Perfetti Van Melle (owner of the Mentos brand, among others) for $1.35 billion. This price tag equates to around 3 times the unit’s sales and about 15 times EBITDA, by our estimates, which strikes us as a reasonable valuation for a segment that has been struggling for some time. While the transaction isn’t slated to close until the fourth quarter of 2023, we think that parting ways with a business that has fallen out of favor with consumers should be an advantageous undertaking, enabling the firm to focus its resources on its highest return opportunities (particularly within its core chocolate, biscuit, and baked goods aisles). These categories are core to Mondelez, boasting attractive growth prospects, with annual sales growing by mid-single-digit percentages, outpacing the low-single-digit marks that tend to characterize packaged food more broadly.