Heinz and Kraft on Wednesday said they would merge to create North America''s third-largest food and beverage company, in a deal backed by Brazil''s 3G Capital and investment guru Warren Buffett. The combination of HJ Heinz Company and Kraft Foods Group will bring together a wide portfolio of well-known brands and benefit from Heinz''s international platform, the companies said.
Buffet''s Berkshire Hathaway and 3G, Heinz''s owners, will have a 51 percent stake in the combined firm, to be called The Kraft Heinz Company, with a 49 percent stake to be held by Kraft''s existing shareholders. The proposed company would have revenues of about $28 billion a year.
Berkshire and 3G will invest an additional $10 billion to pay for a special cash dividend of $16.50 per share for Kraft shareholders. The dividend represents a 27 percent premium to Kraft''s closing price Tuesday. The deal has been unanimously approved by the companies'' boards of directors.
"This is my kind of transaction, uniting two world-class organisations and delivering shareholder value," Buffett said in a statement. The chairman and chief executive of Berkshire Hathaway is considered one of the world''s savviest investors.
The new company will have eight billion-dollar brands and five others worth more than $500 million in sales. Heinz''s brands include Heinz Ketchup, Ora-Ida potato products and Weight Watchers packaged foods. Kraft''s portfolio includes Kraft Macaroni & Cheese, Maxwell House coffee and Oscar Mayer hot dogs. "By bringing together these two iconic companies through this transaction, we are creating a strong platform for both US and international growth," said Alex Behring, chairman of Heinz and the managing partner at 3G Capital.
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