Kraft Foods and H.J. Heinz, with help from its owners 3G Capital and Warren Buffett’s Berkshire Hathaway, have agreed to merge in a deal that will create one of the world’s largest food and beverage companies. The companies didn’t disclose a value for the deal, but based on Kraft’s market capitalization following the announcement, it is estimated to be more than $NZ50billion.
The combined company, which will be called the Kraft Heinz Co., will include well-known brands such as Maxwell House coffee, Jell-O, and Planters nuts, along with the namesake Kraft cheese products and Heinz ketchup and condiments. Kraft Heinz would rank as the fifth-largest food company in the world, behind Nestlé SA, Mondelez International Inc., PepsiCo Inc. and Unilever Group, according to Euromonitor International Inc.
Heinz shareholders will hold a 51% stake in the combined company, while Kraft shareholders will hold a 49% ownership stake. Kraft shareholders also will receive a special dividend of $16.50 a share, representing 27% of Kraft’s closing price on Tuesday. Buffett’s Berkshire Hathaway Inc. and 3G Capital will provide the $10 billion to fund the special dividend. In 2013, 3G teamed up with Buffett to buy U.S. ketchup maker Heinz for US$23 billion. 3G is an acquisitive Brazilian firm known for buying consumer companies it considers bloated and aggressively slashing costs. Annual cost savings from the Kraft and Heinz combination could reach $1.5 billion by the end of 2017.
3G has become a major player in the U.S. food sector. Alex Behring, Chairman of Heinz and managing partner at 3G Capital, will become the Chairman of Kraft Heinz, and Bernardo Hees, Chief Executive of Heinz, will be the CEO. John Cahill, Kraft Chairman and CEO, will become Vice Chairman, and the board of Directors will consist of five members appointed by the current Kraft board, as well as the current Heinz board, including three members each from Berkshire and 3G Capital.
The Wall Street Journal was first to report that Kraft Foods Group Inc. and H.J. Heinz Co., were in merger talks.
Today’s Kraft was born in a huge corporate split in 2012, when it was spun off by its namesake, leaving an international snacks company now called Mondelez International Inc.
Source: The Wall Street Journal