Two years after H.J. Heinz Co. was taken private and just weeks after Kraft Foods Group's "new" CEO cleaned out its executive suite, Heinz on March 25 announced it will buy Kraft in a cash and stock deal.
3G Capital and Berkshire Hathaway, who bought Heinz in 2013, apparently engineered the deal and will pay about $10 billion in cash to Kraft stockholders, while also giving them stock amounting to 49 percent of the new company. It will be called Kraft Heinz Co. and will maintain headquarters in both Pittsburgh and the Chicago area.
The merger will create the fifth largest food & beverage company in the world, the companies said, and the third largest in North America. The new company will have revenues of approximately $28 billion with eight billion-dollar brands and five brands between $500 million-$1 billion.
It will also create a mammoth company focused on solid but old brands in slow-growth categories in the center of the store.
When the transaction closes, Alex Behring, chairman of Heinz and the managing partner at 3G Capital, will become the chairman of Kraft Heinz Co. John Cahill, chairman of Kraft since its split with Mondelez and CEO since the Dec. 27 early retirement of Anthony Vernon, will become vice chairman and chair of a newly formed operations and strategy committee of the board of directors.
Bernardo Hees, CEO of Heinz, will be CEO of the new company. The new executive team for the combined global company will be announced during the transition period, but no later than transaction closing, the companies said.
Hees has been a key figure in 3G Capital, a Brazilian investment firm that, with Warren Buffet's Berkshire Hathaway, bought Heinz for $28 billion two years ago. Hees ran Burger King while the Brazilian firm owned that chain before returning it to public stock ownership. 3G also had a hand in InBev, including helping that Belgian firm buy Anheuser-Busch in 2008.
Hees said: "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.”
The board of directors of the combined company will consist of five members appointed by the current Kraft board, as well as the current Heinz board, including three members from Berkshire Hathaway and three members from 3G Capital.
In a statement, the companies said there are "significant synergy opportunities with strong platform for organic growth in North America, as well as global expansion, by combining Kraft’s brands with Heinz’s international platform." Top brands include Heinz, Kraft, Oscar Mayer, Ore-Ida and Philadelphia.
The transaction is subject to approval by Kraft shareholders, receipt of regulatory approvals and other customary closing conditions and is expected to close in the second half of 2015.