PITTSBURGH and NORTHFIELD, Ill. -- “Together we will create an even brighter future." So promised Kraft Foods chairman and CEO John Cahill in announcing the food and beverage giant’s merger with H.J. Heinz Co. Wednesday morning.
Together, the combined entity—dubbed The Kraft Heinz Company—forms the third-largest food and beverage company in North America behind PepsiCo and Tyson Foods.
"We are thrilled about the unique opportunities this merger will create for our consumers worldwide, as well as our employees and business partners,” said Bernardo Hees, Heinz chief executive officer. “Together, Heinz and Kraft will be able to achieve rapid expansion while delivering the quality, brands and products that our consumers love."
The combination of the companies, as reported in a 21st Century Smoke/CSP Daily News Flash, joins together two portfolios of well-known brands, including Heinz, Kraft, Oscar Mayer, Ore-Ida and Philadelphia. Together the new company will have eight $1-billion brands and five brands between $500 million and $1 billion. The complementary nature of the two brand portfolios presents substantial opportunity for synergies, which will result in increased investments in marketing and innovation, according to the companies.
The Matchmaker
Key to making the deal happen was Heinz investor Warren Buffett, chairman and CEO of Berkshire Hathaway.
"I am delighted to play a part in bringing these two winning companies and their iconic brands together,” he said. “This is my kind of transaction, uniting two world-class organizations and delivering shareholder value. I'm excited by the opportunities for what this new combined organization will achieve."
"Together we will have some of the most respected, recognized and storied brands in the global food industry, and together we will create an even brighter future," said Cahill. "This combination offers significant cash value to our shareholders and the opportunity to be investors in a company very well positioned for growth, especially outside the United States, as we bring Kraft's iconic brands to international markets. We look forward to uniting with Heinz in what will be an exciting new chapter ahead."
Under the terms of the agreement, which was unanimously approved by both Heinz and Kraft's Boards of Directors, Kraft shareholders will own a 49% stake in the combined company, and current Heinz shareholders will own 51% on a fully diluted basis. Kraft shareholders will receive stock in the combined company and a special cash dividend of $16.50 per share. The aggregate special dividend payment of approximately $10 billion is being fully funded by an equity contribution by Berkshire Hathaway and 3G Capital.
The New Management
When the transaction closes, Alex Behring, chairman of Heinz and the managing partner at 3G Capital, will become the chairman of The Kraft Heinz Company. Cahill will become vice chairman and chair of a newly formed operations and strategy committee of the Board of Directors. Hees will be appointed CEO of The Kraft Heinz Company.
Heinz Co., Pittsburgh, Pa., is one of the world’s leading marketers and producers of healthy, convenient and affordable foods specializing in ketchup, sauces, meals, soups, snacks and infant nutrition.
Kraft Foods Group Inc., Northfield, Ill., is one of North America's largest consumer-packaged-food and beverage companies with annual revenues of more than $18 billion. The company's iconic brands include Kraft, CapriSun, Jell-O, Kool-Aid, Lunchables, Maxwell House, Oscar Mayer, Philadelphia, Planters and Velveeta.
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