It’s time for Jorge Paulo Lemann to get back in the hunt.

That, anyway, is the word inside the food industry, where the Brazilian billionaire has been doing blockbuster deals roughly every two years. In 2013, he persuaded Warren Buffett to team up on H.J. Heinz. Then, in 2015, the duo orchestrated the $55 billion merger of Heinz and Kraft Foods.

“It’s logical that this would be the year,” said David Palmer, a food industry analyst at RBC Capital.

The talk has traders on edge. Last month, a story in a little-known Swiss magazine, resurfacing well-worn speculation about Lemann’s plan to buy Mondelez with Buffett, spurred an immediate pop in the U.S. snack giant’s shares. (They soared 28 percent in just a few minutes.) So far, no deal has been announced. Regardless, the question of what Lemann might go after in 2017 has just about everyone grasping for leads. Besides Mondelez, some other names include General Mills, Kellogg and Campbell Soup.

And:

Buffett’s Berkshire Hathaway is Coke’s biggest shareholder (with a 9 percent stake) and Lemann once called the company his dream acquisition.

To swallow the $179 billion soft-drink maker, an offer would probably need to come from Anheuser-Busch InBev, which Lemann controls along with other Brazilian billionaires and wealthy Belgian families. AB InBev and Coke both declined to comment.

As recently as 2015, Buffett said a deal was “very unlikely” because Coke wasn’t looking for one. But last month, his son Howard announced he wouldn’t stand for re-election to the company’s board. CEO Muhtar Kent also said he will step down next year and hand the reins to his lieutenant, James Quincey. That’s fueled speculation a deal is more likely now.

“This seems like a situation tailor-made for a 3G transformation,” said Steve Wallman, a fund manager and longtime Berkshire shareholder.

David Fuller's view

Warren Buffett’s cash and cash equivalents currently sits at $85 billion, according to Bloomberg.  That is Berkshire Hathaway’s biggest cash holding since at least 1900 and most likely an all-time record.  Moreover, it is presumably still growing.  

We can interpret that in two ways.  1) Buffett is concerned about valuations and is building-up his cash reserves so that he can buy following at least a sharp correction. This has proved to be his preferred strategy over the decades.   2) Buffett may feel that with global GDP improving, plus Trump’s domestic economic policies, Wall Street may be right in propelling US share indices to new all-time highs.  In that event, he may help Jorge Paulo Lemann to arrange a buyout of Coca-Cola.

Buffett is clearly positioned for a great opportunity and Coke is perhaps his all-time favourite share.  The recent resignation of his son from the Coke board lends credibility to the takeover story.  However, Buffett loves to buy near significant market troughs, although they usually occur far apart in time.  Meanwhile, Coke has ranged for nearly four years and it is down from its 2016 high of 47.13, partly on Dollar Index strength, so Buffett would not be chasing. 

Three other large investment firms – Vanguard Group, Capital Group and BlackRock - hold a combined 18% of Coke, so a takeover of the share which currently yields 3.38% would be tricky without their cooperation.  My guess is that Buffett is extremely interested in a possible buyout of Coke but at this stage Jorge Paulo Lemann is largely responsible for the tactics.  

Whether or not Coke is eventually purchased by Berkshire Hathaway, conservative investors could do worse than own this very successful, multinational Autonomy.