HJ Heinz buying Kraft in deal to create food giant

NEW YORK (AP) — H.J. Heinz Co. is buying Kraft Foods, creating one of the largest food and beverage companies in the world with annual revenue in excess of $28 billion.

The deal was engineered by Warren Buffett’s Berkshire Hathaway and the company that owns Heinz, Brazilian investment firm 3G Capital. Berkshire and 3G will invest $10 billion in what will come to be known as The Kraft Heinz Co.

The company, the third largest of its kind in North America, will own Kraft, Heinz, Oscar Mayer, Ore-Ida and other brands. It will maintain headquarters in Pittsburgh, where Heinz is based, and also in the Chicago area, where Kraft resides.

Shares of Kraft jumped more than 14 percent Wednesday before the opening bell.

Kraft shareholders will receive stock in the combined company and a special cash dividend of approximately $10 billion, or $16.50 per share. Each share of Kraft will be converted into one share of Kraft Heinz.

Current Heinz shareholders will own 51 percent of the combined company, with Kraft shareholders owning a 49 percent stake.

Annual cost savings estimated to be $1.5 billion are expected to be booked by the end of 2017.

“This is my kind of transaction,” said Buffett in a printed statement. “Uniting two world-class organizations and delivering shareholder value. I’m excited by the opportunities for what this new combined organization will achieve.”

Heinz CEO Bernardo Hees will become CEO, Alex Behring, Heinz chairman and managing partner at 3G Capital, will be chairman. Kraft CEO and Chairman John Cahill will become vice chairman.

The deal still needs a nod from federal regulators as well as shareholders of Kraft Foods Group Inc., but the boards of both companies unanimously approved it. It is expected to close in the second half of this year.

Kraft Heinz plans to keep Kraft’s current dividend per share once the transaction closes. Kraft has no plans to change its dividend before the deal closes.

 

Copyright 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

KXAN.com provides commenting to allow for constructive discussion on the stories we cover. In order to comment here, you acknowledge you have read and agreed to our Terms of Service. Users who violate these terms, including use of vulgar language or racial slurs, will be banned. If you see an inappropriate comment, please flag it for our moderators to review.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s