H.J. Heinz and Kraft Foods have entered into a definitive agreement to merge, in a deal that will form the fifth largest food and beverage company in the world.
The Kraft Heinz Company will have revenues of approximately $28bn and will be co-headquartered in the US cities of Pittsburgh and Chicago.
The transaction is thought to be worth as much as $40bn.
As part of the deal, Kraft shareholders will take a 49% stake in the new company, with current Heinz shareholders owning the remaining 51% on a fully diluted basis. Kraft shareholders will receive stock in the combined company and a special cash divided 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 proposed merger creates substantial value for Kraft shareholders,” the two companies claimed, with the special cash dividend payment representing 27% of Kraft’s closing price as of 24 March.
Kraft chairman and chief executive officer John Cahill said: “Together we will have some of the most respected, recognised and storied brands in the global food industry, and together we will create an even brighter future. 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.”
Heinz chief executive officer Bernardo Hees added: “We are thrilled about the unique opportunities this merger will create for our consumers worldwide, as well as our employees and business partners. Together, Heinz and Kraft will be able to achieve rapid expansion while delivering the quality, brands and products that our consumers love. Over the past two years, we have transformed Heinz into one of the most efficient and profitable food companies in the world while reinvesting behind our key brands and continuing our relentless commitment to quality and innovation.”
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