Heinz and Kraft to Merge in 3G-Buffett Joint Venture

Published Date : Mar 25, 2015

Mr. Warren Buffett and 3G Capital are to acquire Kraft Foods Group and combine it with Heinz in a deal which will create one of the biggest consumer groups in the world with joint revenues of US$28 billion.

Under the terms of the cash and stock transaction, declared early on Wednesday, Kraft shareholders will possess 49% of the joint publicly quoted firm, to be known as Kraft Heinz, with the remainder being acquired by Heinz that is possessed by the 3G-Buffett partnership. The deal comprises a unique dividend for Kraft investors of US$16.50 per share, which will cost Berkshire Hathaway and 3G around US$10 billion.

The deal is focused to reduce costs and to enhance the growth of the two firms, both at home as well as making Kraft able to take undue credit of the global reach of Heinz. It shows that well established US food groups such as Kraft that has a heritage going back to 1903, have fought to accept to new customer demands for fresher and lesser processed foods.

The grouping is also expected to propel the merger activity in the US food industry, following the spate of deals in the previous year that was also driven by the consolidation between the mid market food groups that includes the US$8.6 billion acquisition of the rival Hillshire by Tyson Foods, which is a US meat producer. The chairman and chief executive of Kraft, Mr. John Cahill, stated the merger offered a significant cash value to stockholders and the opportunity to become the  investors in a firm, which very well positioned for development, especially those outside the US.