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PITTSBURGH — H.J. Heinz Co. and Kraft Foods Group Inc. said on Wednesday that they are merging to create the world’s fifth-largest food and beverage supplier, with annual revenue of $28 billion.
H.J. Heinz Co. and Kraft Foods Group Inc. said on Wednesday that they are merging to create the world’s fifth-largest food and beverage supplier, with annual revenue of $28 billion.
The new company will be called the Kraft Heinz Co. and will be co-headquartered in Pittsburgh and the Chicago area.
The Kraft Heinz Co. At A Glance |
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• 3rd largest North American food/beverage company |
• 5th largest food/beverage company globally |
• 98% penetration in North American households |
• No. 1 or 2 market share in 50+ countries |
• Total revenue of about $28 billion |
• 8 billion-dollar brands |
Warren Buffett’s Berkshire Hathaway Inc. and Brazilian private equity firm 3G Capital, which together acquired Heinz in 2013, will invest $10 billion to fund a special dividend to be paid to Kraft shareholders.
Kraft shareholders are to receive a cash dividend of $16.50 per share and stock representing 49% of the new company. Heinz shareholders will own 51% of the new company, the companies said in a statement. The stake owned by Berkshire and 3G will remain privately held, while the rest of the company’s stock will be publicly traded on the Nasdaq.
The deal unites iconic brands such as Kraft, Heinz, Oscar Mayer, Jell-O, Philadelphia and Maxwell House. Eight of the new company’s brands have annual sales of at least $1 billion.
"This is my kind of transaction, uniting two world-class organizations and delivering shareholder value," said Buffett, Berkshire’s chief executive officer.
3G has been acquiring food brands, including Burger King, which it bought in 2010. Burger King last year acquired Canadian coffee and doughnut chain Tim Hortons Inc.
Kraft, the product of a 2012 split that created Mondelez International Inc., primarily sells in the United States, while Heinz is stronger internationally.
"By bringing together these two iconic companies through this transaction, we are creating a strong platform for both U.S. and international growth," Alex Behring, chairman of Heinz and managing partner at 3G Capital, said in the statement.
Behring will become chairman of Kraft Heinz. John Cahill, Kraft’s chairman and CEO, will be vice chairman, and Heinz CEO Bernardo Hees will be the new firm’s chief executive.
The companies said they estimated they could find savings of $1.7 billion annually by the end of 2017 through cost reductions and efficiencies.
