US food giant Heinz is merging with Kraft Foods Group to create the third largest food and beverage company in the USA and the world’s fifth largest food and drink group, the companies said.
(26 March 2015) US food giant Heinz is merging with Kraft Foods Group to create the third largest food and beverage company in the USA and the world’s fifth largest food and drink group, the companies said.
The deal has been orchestrated by Heinz's owners, the Brazilian investment firm 3G Capital and billionaire investor Warren Buffett's Berkshire Hathaway.
Heinz shareholders will own 51% of the new Kraft Heinz Company, with Kraft shareholders owning a 49% stake.
3G and Berkshire Hathaway bought Heinz two years ago for US$23bn and took the company private in 2013.
Heinz chairman and 3G Capital managing partner Alex Behring said: "By bringing together these two iconic companies through this transaction, we are creating a strong platform for both US and international growth."
Kraft Heinz would rank as the fifth largest food company in the world, behind Nestlé SA, Mondelez International Inc, PepsiCo Inc and Unilever Group, according to Euromonitor International Inc.
The new firm expects to make annual cost savings of US$1.5bn by the end of 2017, with combined sales worth some US$29bn.
Although regulators and Kraft shareholders still need to approve the merger, both companies’ boards have approved it and the deal is expected to close in the second half of this year.
The combined company will include well-known brands such as Oscar Mayer meats, Maxwell House coffee, Jell-O, Planters nuts, along with Kraft cheese products and Heinz ketchup and condiments.
Kraft was split into two separate companies in 2012 – a North American grocery business of the same name and an international snack foods company called Mondelez International.
3G is an acquisitive Brazilian firm known for buying consumer companies it considers bloated and aggressively slashing costs.
It has become a major player in the US food sector. In 2010, it acquired private fast-food restaurant Burger King Worldwide Inc. In 2013, 3G teamed up with Buffett to buy Heinz. And last year, 3G bought Canada’s coffee and doughnut retailer Tim Hortons Inc for US$11bn through its Burger King holding, partly financed by Buffet.
The latest deal comes as Kraft and other major US food makers struggle with changes in consumer tastes that have hampered their ability to sell packaged, processed food, the Wall Street Journal said.
Kraft’s revenue last year was effectively flat at US$18bn, while net profit fell 62% to US$1bn. The company has said it lost market share in 40% of its US businesses and was flat in the rest.