Kraft Foods Group Inc (NASDAQ:KRFT) has announced that they will merge with famous ketchup manufacturer H.J. Heinz Company (NYSE:HNZ). The merge is aimed at creating one of the largest food and beverage Production Company in North America.
The merge which is by far the biggest merger this year was confirmed when H.J Heinz, which is owned by Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.A) and 3G Capital, confirmed the good news. Share ownership is said to be spit by 51% to Heinz and 49% for Kraft investors. The merger will expect annual sales of up to $28Billion and a market value of about 80 billion.
The two companies have reached a consensus where Kraft will receive stock within the merger, with 3G Capital and Berkshire funding Kraft with a special cash dividend of $16.50 per share.
The merger has revealed 3G Capital’s intention to expand internationally through cost trimming as well as possessing some of the most lucrative and famous brands. The merger by 3G Capital and Warren Buffet aim to promote the new company into taking a bigger market share of the processed food industry. Heinz Kraft aims to combat the decreasing popularity of processed food with the market deviating towards more organic and healthy food. The company will strategize on revamping the appeal and widening the market.
Merging with craft will give the two parent companies an advantage especially because they will be able to combine the two strategies used by each company. With Heinz commanding good recognition in the foreign market, and Kraft’s outreach to its home market in the USA. Heinz will help Kraft to penetrate foreign markets.
Most mergers of this capacity are usually plagued by antitrust issues especially concerning controlling interest. In the case of Heinz and Kraft Foods Group Inc (NASDAQ:KRFT), there were mutual agreements, probably because the two companies complement each other through their products. Mr. Buffet explained that the merger has been in a plan for a few years since his company merged with 3G. He therefore personally oversaw the deal, with Mr. Heinz.