Heinz, Kraft to merge in Buffett-financed deal

NEW YORK:  Heinz and Kraft 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 per cent stake in the combined firm, to be called The Kraft Heinz Company, with a 49 per cent 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 per cent premium to Kraft’s closing price on 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.  Behring will become chairman of the merged company, which will be co-headquartered in Pittsburgh, Pennsylvania, and the Chicago area, the current locations of Heinz and Kraft’s head offices, respectively. — AFP