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HJ Heinz Company and Kraft Foods Group to Merge

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HJ Heinz Company and Kraft Foods Group to Merge

HJ Heinz Company and Kraft Foods Group to Merge
March 26
10:00 2015

HJ Heinz Company and Kraft Foods Group have agreed to merge to create The Kraft Heinz Company, forming the third largest food and beverage company in North America. The combination of the food companies joins together two portfolios of strong brands, including Heinz, Kraft, Oscar Mayer, Ore-Ida and Philadelphia. Together the new company will have eight $1 billion plus brands and five brands between $500 million and $1 billion. The complementary nature of the two brand portfolios presents substantial opportunity for synergies, which will result in increased investments in marketing and innovation.

The significant synergy potential includes an estimated $1.5 billion in annual cost savings implemented by the end of 2017. Synergies will come from the increased scale of the new organization, the sharing of best practices and cost reductions.

Heinz KetchupUnder the terms of the agreement, which has been unanimously approved by both Heinz and Kraft’s boards of directors, Kraft shareholders will own a 49% stake in the combined company, and current Heinz shareholders will own 51% on a fully diluted basis.

HJ Heinz Company is currently owned by an investment consortium comprised of Berkshire Hathaway and 3G Capital following a $28 billion acquisition deal in 2013.

Kraft shareholders will receive stock in the combined company and a special cash dividend 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.

Alex Behring, chairman of Heinz and the managing partner at 3G Capital, comments: “By bringing together these two iconic companies through this transaction, we are creating a strong platform for both US and international growth. Our combined brands and businesses mean increased scale and relevance both in the US 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.”

KraftCheeseWarren Buffett, chairman and chief executive of Berkshire Hathaway, says: “I am delighted to play a part in bringing these two winning companies and their iconic brands together. 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.”

“Together we will have some of the most respected, recognized and storied brands in the global food industry, and together we will create an even brighter future,” says John Cahill, Kraft chairman and chief executive. “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.”

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