Food Giants Kraft And Heinz To Form North America’s No.3 Food Company

LONDON – Kraft Foods Group Inc, the maker of Velveeta cheese, will merge with ketchup maker H.J. Heinz Co, owned by 3G Capital and Warren Buffett’s Berkshire Hathaway Inc, to form North America’s third-largest food and beverage company.

Kraft’s shares rose 34 percent to $82.50 in premarket trading on Wednesday.

The combined company, to be led by Heinz CEO Bernardo Hees, will have revenue of about $28 billion, about half that of market leader PepsiCo in 2014.

Packaged-food makers such as Kraft are battling sluggish demand as consumers shift to products perceived to be healthier.

Kraft has overhauled its senior management over the past few months and has said it will develop products to meet changing consumer preferences.

Berkshire Hathaway will own more than 320 million shares in the combined company, which will have about 1.22 billion shares outstanding, Buffett told CNBC.

“We will be in the stock forever,” he said.

Brazilian private equity firm 3G Capital and Berkshire Hathaway acquired Heinz for $23.2 billion in 2013.

The Kraft deal is unlikely to face antitrust hurdles as there is little overlap in products, analysts said.

Kraft’s products include cheese, processed meats, packaged meals and Maxwell House coffee, while Heinz makes ketchup, sauces and frozen foods.

The combined publicly traded company, expected to save about $1.5 billion in annual costs by the end of 2017, will have eight brands worth over $1 billion each, the companies said.

Kraft shareholders will get one share in the combined company, to be called the Kraft Heinz Co, and a special cash dividend of $16.50 for every share held.

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