The Brazilian private equity firm 3G, which bought Heinz in 2013, will add cheese, coffee, and Jell-O to its pantry.
Mike Mozart / Via flic.kr
Kraft Foods Group's short history as an independent company will take another turn as it agrees to be bought by Heinz, which itself was bought by Brazilian private equity firm 3G two years ago.
The companies announced Wednesday morning that Heinz would buy 51% of Kraft and pay out a $16.50-per-share, about $10 billion, special dividend to Kraft shareholders, funded by 3G and Warren Buffett's Berkshire Hathaway.
Combined, the companies said, the Pittsburgh-and-Chicago-suburbs based food behemoth would have $28 billion in annual revenues and be the world's fifth largest food and beverage company and the third largest in the United States.
Kraft had $18 billion in revenue this past year, about flat from the year before and just over $1 billion in profits. Before deal talks were reported by the Wall Street Journal Wednesday evening, Kraft's market capitalization was about $37 billion at a price of $61.33. In pre-market trading, Kraft's stock is trading up to $76.88.
"I am delighted to play a part in bringing these two winning companies and their iconic brands together," Buffett, the chairman of Berkshire Hathaway said in a statement. "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."
Kraft's brands include its eponymous cheese, Oscar Meyer, Maxwell House, Capri Sun, and Jell-O.
The merger is being overseen by Kraft's new chief executive John Cahill, who took over for Tony Vernon at the end of last year. Cahill was previously a partner at the private equity fund Ripplewood. Cahill will become vice chairman of the new company, while Heinz chief executive officer Bernando Hees will chief executive of the merged company.
Hees came from Burger King, another iconic American food company bought by 3G, and instituted an extensive cost cutting program that has become the private equity firm's signature. A round of costs and "zero-based budgeting" — where all costs are assumed to be at zero and have to be rejustified — will probably be implemented at Kraft.
Alex Behring, a partner at 3G and the chairman of Heinz, will be chairman of the new company.
"Our combined brands and businesses mean increased scale and relevance both in the U.S. and internationally. We have the utmost respect for the Kraft business and its employees, and greatly look forward to working together as we integrate the two companies," Behring said in a statement.
3G, run by Brazilian billionaire financier Jorge Paulo Lemann, has a taste for iconic North American food brands.
Not only did 3G buy Heinz with Buffett's assistance in 2013, the firm also acquired Burger King for $4 billion in 210. Burger King — run by former 3G partner Daniel Schwartz and 70% owned by the firm — acquired Canadian coffee-and-donuts company Tim Hortons last year, again with funding help from Buffett. The companies now exist under the auspices of a new company run by Schwartz, Restaurant Brands International, that is about 51% percent owned by 3G.
Kraft itself is the product of decades of buyouts and spinoffs. Its parent company was bought by tobacco company Phillip Morris in 1988 for $13 billion, where it was combined with General Foods, which had Oscar Meyer, Jell-O, and Kool-Aid. Kraft was then combined again with another food conglomerate when Phillip Morris bought what was remaining of Nabisco (which went through its own tobacco buyout-and-spinoff) in 2000.
In 2001, Phillip Morris sold sell some of what was now Kraft Foods to the public, and spun it off entirely in 2007. Kraft then split off again in 2012, forming Kraft Foods and renaming the legacy company Mondelez International, which hung onto brands like Ritz, Oreos, Triscuit, Wheat Thins, and Trident.
via IFTTT
No comments:
Post a Comment