Week in Review: Facebook’s New Offerings, Kraft + Heinz, China Buying Italy, New York’s Grossest Groceries

By Alex Plough     March 27, 2015

Facebook Plans App Ecosystem and Hosted News

Facebook launched its developer conference on Wednesday and the all-powerful social network announced a string of new features including a move into the burgeoning ‘Internet of Things’ market.

CEO Mark Zuckerberg outlined his vision for the company as a family of different applications, incorporating Messenger, WhatsApp, Instagram and the virtual reality pioneer Oculus. News leaked before the conference of plans to open up its Messenger to third-party developers and businesses looking for new ways to interact with the app’s 600 million users.

Facebook wants to build a thriving ecosystem of apps to create and share content using Messenger, while it billed the new “Customer-To-Business Chat” as a way to simplify the customer service experience rather than a consumer marketing tool.

Other new projects announced this week included a software development kit for its recently acquired Parse platform for developers building connected devices, also known as the ‘Internet of Things’ (IoT).  Facebook joins Google, Apple and Samsung in its bid for a share of the consumer IoT space.

So far the ‘smart home’ revolution has failed to gain ground in the mass market, largely because a lack of common software and hardware standards make it too complicated to set up for anyone other than the most dedicated of hobbyists.

Last year, IT research agency International Data Corporation (IDC) predicted that the market will grow by more than $5 trillion over the next five years, promising big rewards for the tech company that convinces the most people to use its software platform.

Finally, publishers are reportedly talking to Facebook about hosting their content on the social network rather than forcing users to click through to another site. Facebook has reportedly held talks with at least half a dozen media firms and its first partners are said to be The New York Times, BuzzFeed and National Geographic. Could this be the saviour of the news industry or a Faustian Pact?

Kraft Merges with Heinz to Create Junk Food King

This week the American processed food icon Kraft Foods announced a $46 billion mega-merger with H.J. Heinz Company, backed by Brazilian private equity firm 3G Capital, and Warren Buffett’s Berkshire Hathaway Inc. The move will create the third-largest food company in North American and brings a stable of household names under one roof, from Heinz ketchup to Jell-O.

The deal was the largest in at least a decade to exclude all of the big-named banks that dominate the M&A market, called bulge-bracket firms. Instead the firms used just one financial adviser each, Lazard Ltd. and Centerview Partners.

Lazard’s CEO Ken Jacobs and managing director Alexander Hecker reportedly spearheaded the record deal which boosted the standing of both boutique firms in the competitive world of M&A advisers. Lazard’s shares rose as much as 2.8% on Wednesday, making it the best performing stock on the Russell 1000 Financial Services Index.

Kraft’s employees will not be rejoicing about 3G’s plans to squeeze $1.5 billion in annual savings out of the deal by the end of 2017. While the notoriously cut-throat 3G Capital prides itself on trimming the fat at its acquisitions with ruthless efficiency, the ultra thin margins in the competitive world of consumer packaged goods make widespread redundancies inevitable according to analysts. Pittsburgh-based Heinz has slashed more than 7,000 jobs since going private in 2013 when it was bought out by Warren Buffett’s Berkshire Hathaway.

“It’s the press-release version of saying they’re going to fire people,” Meyer Shields, an analyst at Keefe Bruyette & Woods, told Bloomberg. “When you look at the fact that the deal is not accretive until 2017, that tells me that it’s only accretive after all these efforts to reduce expenses.”

China’s Italian Love Affair

The state owned China National Chemical company announced it was buying the 143-year-old Italian tire-maker Pirelli for $7.7 billion, one in a string of recent sales of Italy’s industrial icons to foreign buyers.

If the deal is successful it would create a global leader with a 10 percent of the world tire market. ChemChina will gain access to technology to make premium, and higher margin, tires while Pirelli gets greater access to the vast Chinese market.

A weak European single currency has attracted large numbers of cash-rich Chinese buyers to Italy, and this year the coutnry was second only to UK in terms of Chinese investment, with cross-border acquisitions totaling $3.43 billion, according to Bloomberg.

On a June visit to Beijing, Italian Prime Minister Matteo Renzi implored Chinese investors to buy up stakes in Italian companies and the charm offensive is working. The Italian newspaper La Repubblica found that around 200 Italian business are now controlled by Chinese owners, not including the ones owned by Chinese living in Italy.

Next on the shopping list are Italy’s global leaders in the fashion, machinery and industrial equipment industries according to experts. With the second-biggest debt in Europe of more than 2 trillion euros ($2.53 trillion), Italy needs all the cash it can get. Some worry, however, that Renzi could face a popular backlash from the sale of its industrial crown jewels.

“The sale of a prized piece of our industrial system like Pirelli to foreign buyers would not be a drama in itself if Italian capitalism were able to face up to international competition and the government had an industrial policy,” the head of Italy’s biggest union, Susanna Camusso told Reuters.

New York’s Grossest Grocery Stores

Ever question how fresh the produce is at New York’s neighbourhood grocery stores? Journalists at the hyper-local news site Patch amassed millions of violations against the city’s food markets to create this interactive map of over 33,000 businesses. During months of work, they combined reports from state inspectors with experts’ testimony and on-the-ground reporting to verify their findings and published a series of more than 70 articles on every corner of New York. Time to find out find out what secrets your grocery might be hiding.

This entry was posted on Friday, March 27th, 2015 at 2:47 pm. It is filed under Week in Review and tagged with Buzfeed, China National Chemical Corporation, Facebook, Heinz, Kraft, National Geographic, New York Times, Pirelli. You can follow any responses to this entry through the RSS 2.0 feed.