In the current economy, some industries are still struggling to survive. One such industry is the packaged foods industry. On top of these economic troubles, industries like this can suffer huge losses if the consumers decide to change their spending habits. Companies like Kraft Foods Group Inc. have started to feel these changes over the last year or so. To try to combat these problems, the company has tried to streamline its organization and cut jobs and costs wherever possible.
Kraft has now decided that the best course of action will be to merge with H.J. Heinz Co. This will create one of the largest food companies in the world. The new company will be the third-largest food and beverage company in the United States and fifth in the world.
This merger will expand the already well-known Kraft brand. Kraft currently owns consumer favorites such as Jell-O, Oscar Mayer and Kool-Aid. One of the problems that faced Kraft recently was the change in consumers’ habits, as consumers have started to try to eat healthier.
This has caused Kraft to suffer greatly. In response it has moved to change its products, including removing dyes from its cheeses. It has also tried to revive older brands that have begun to fail. Some of these brands include Jell-O and Planters peanuts.
In the new layout of the company, Heinz will have a 51 percent stake in the company while Kraft will only have a 49 percent stake in the new company. When word of this merger got out, Kraft’s shares rose 34 percent in the premarket. This raised the value of the company to $49 billion.
The new company is expected to have a revenue of about $28 million. Other stipulations of the deal include a dividend of $16.50 per share, which will be paid to the Kraft shareholders. This totals to $10 billion of dividends.
The companies that helped to organize and finance this deal include 3G Capital Partners L.P. and Berkshire Hathaway. This is just one of the mergers or acquisitions that these two companies have staged. 3G Capital Partners acquired Burger King in 2010 for $3.3 billion.
Then, in 2014, 3G used Burger King to acquire Tim Hortons for $11 billion. This gave 3G a foothold in the restaurant industry. Meanwhile, in 2013 3G and Warren Buffet bought Heinz for $23 billion. Warren Buffet of Berkshire Hathaway has been financing parts of these deals. In a Wall Street Journal article, he said the companies “are committed to long-term ownership of the Kraft Heinz Company.”
March 27, 2015.