Heinz Ketchup and Kraft Dinner, the most delicious combination on a kid’s plate is going to be a fantasy come true. Get ready for an all new food salad as H.J Heinz and Kraft Foods is set to Merge in a deal backed up by 3G Capital and Warren Buffet’s Berkshire Hathaway Inc. With a revenue of about $28 billion, the merger will create the third largest food and beverage company in North America and the fifth largest in the world.
Berkshire Hathaway is set to invest $10 billion in the new food giant as existing Heinz shareholders will be able to collectively own 51% of the new corporation.
Along with Berkshire Hathaway, 3G Capital co-owns Heinz Co. 3G Capital is known for pairing down the assets of acquired companies so as to rise profitability. Furthermore, 3G Capital owns 51% of Restaurant Brands Inc., which was created last year when 3G’s Burger King bought out Canadian pride and joy Tim Hortons Inc.
As a result of the merge, Kraft shareholders will receive a special cash dividend of $16.50 per share following the closure. This contribution is being fully funded by the $10 billion equity contribution from Berkshire Hathaway. The special cash dividend payment amounts to 27% of Kraft’s closing price on March 24, 2015. They are also set to receive stock in The Kraft Heinz Company equalling a 49% stake in the company.
Alex Behring, Heinz chairman managing partner at 3G Capital said that, “every time you put two major public companies together, there are natural synergies and efficiency opportunities associated with that.’
With the kind of innovative and complementary companies that they are, the new company is set for success as the merger will achieve increased investments and substantial opportunities to grow and succeed in the ever-changing food and beverage industry.
The new company, Kraft Heinz Co., is set to have eight $1+ billion brands and also five brands that are worth between $500 million and $1 billion. Alongside Kraft and Heinz, the company will own household names like Philadelphia and Oscar Mayer.
The new company will be called The Kraft Heinz Company and will have headquarters in both Pittsburgh, Penn. And Chicago, Illinois.
“We are thrilled about the unique opportunities this merger will create for our
consumers worldwide, as well as our employees and business partners. Together, Heinz and Kraft will be able to achieve rapid expansion while delivering the quality, brands and products that our consumers love,” said Bernardo Hees, Heinz Chief Executive Officer. “Over the past two years, we have transformed Heinz into one of the most efficient and profitable food companies in the world while reinvesting behind our key brands and continuing our relentless commitment to quality and innovation.”
That is exactly what Kraft Co. is hoping with the merger. Kraft remains optimistic about the company’s growth potential as it is encouraging previous shareholders to continue investing in the new merger company so as to have the opportunity to participate in the new company’s long term worth prospect.
