Announcing the Kraft Heinz Company

Kraft HeinzH.J. Heinz and Kraft Foods Group will combine into one big company. A press release describes the merger agreement:

PITTSBURGH and NORTHFIELD, Ill., March 25, 2015 /PRNewswire/ -- H.J. Heinz Company and Kraft Foods Group, Inc. (NASDAQ: KRFT) today announced that they have entered into a definitive merger agreement to create The Kraft Heinz Company, forming the third largest food and beverage company in North America with an unparalleled portfolio of iconic brands.

Under 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. 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.

The proposed merger creates substantial value for Kraft shareholders. The special cash dividend payment represents 27% of Kraft's closing price as of March 24, 2015. Also, by continuing to own shares of the new combined company, Kraft shareholders will have the opportunity to participate in the new company's long-term value creation potential.

A Reuters article explains the value of combining the companies: "Food industry experts see Kraft benefiting from Heinz's international presence, which generates more than 60 percent of its sales." The new company will address "sluggish demand" by offering more "organic or less processed" foods.

A Wall Street Journal article describes the cost-cutting plans, including losing "hundreds of management jobs."

The move will put several powerful brands under one umbrella. Of course, the jokes have started, such as the Facebook page, "Putting ketchup on your Mac and Cheese."

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Discussion Starters:

  • Read the press release. How would you describe the key messages?
  • What differences do you notice among the press release, Reuters article, and Wall Street Journal article? In other words, how do the companies' messages differ from what the press is reporting about the merger?