FYI: Kraft Foods Group and H.J. Heinz Company have agreed to merge in a deal that will create the fifth largest food and beverage company in the world, and the third largest in America. Kraft shares were up 24% in pre-market trading.
The firms released a statement confirming the deal on Wednesday morning, following a report in The Wall Street Journal on Tuesday that the two were in talks with a deal likely to top $40 billion. Brazilian private equity firm 3G Capital and Warren Buffett’s Berkshire Hathaway Inc., which teamed up in 2013 to buy Heinz for $23 billion, will invest $10 billion in the new company. Kraft will add well-known food brands, including Kraft Singles, Maxwell House, Kool-Aid, and Kraft Mac & Cheese to 3G’s food-focused portfolio.
The new company will be called the The Kraft Heinz Company and will be co-headquartered in Pittsburgh and the Chicago area, with revenues of approximately $28 billion, eight $1 billion+ brands and five brands between $500 million and $1 billion. Kraft shareholders will own 49% of the new company, and receive a special cash dividend of $16.50 per share. The cash dividend payment represents 27% of Kraft’s closing price as of Tuesday, according to the statement.
The relentlessly ambitious 3G is already considered the envy of the food world and activist investors due to its near-singular focus on costs and its list of rich co-investors, among other things. But in the private equity world, it’s also changing the rules of fundraising in a way that’s gotten its rivals — in particular New York-based Blackstone Group — eager to do the same
Regards,
Ted
http://blogs.wsj.com/moneybeat/2015/03/25/morning-moneybeat-on-a-stair-stepper-rally-and-a-blockbuster-deal-for-kraft/tab/print/Current Futures:
http://finviz.com/futures.ashx
Comments
Two of the best Food companies together.....be sure a winner
Merging them helps with scale and raw costs, but you look at Kraft and Conagra and the like and the brands are dated. You have these companies that I think have largely rested on their laurels for years. Additionally, not everyone is eating healthy, but you have a bit of a backlash for the very artificial nature of a lot of these products.
I think at some point these companies have to go after the Hains and Whitewaves and the "roll-up" nature of Kraft/Heinz makes me guess they will integrate more companies. It's not that nobody's going to buy Cheese Whiz anymore - nothing against it and it actually sounds kinda good right now - but it's just I think over time I think people will little-by-little move away from things that are just totally artificial. I mean, look at Jell-o, which has seen declining sales for a while now.
Don't slam jello, I try and eat healthy most of the time, but love my jello for dessert. Fortunately, I own both Kraft and Whitewave, so betting on healthy food and unhealthy food at the same time LOL.
Coke is another example. Eventually people start moving away from soda and the company seems as if it's been caught off-base. Long story short, I guess what I'm trying to say is that these companies in many cases seem to not put a great emphasis on anticipating consumer trends.
I'll continue to own International Flavors (IFF), which provides flavors for a lot of these sorts of products. Flavors are a small fraction of the cost for these products, but a large % of why someone buys a particular product.
I sold off McDonalds and Coke last year for their stagnant sales and their resting on their laurels, no regrets. My taxable portion of portfolio tends to have these lower growth stocks for their dividends, but I expect SOME movement upwards. Didn't see it with those two, so took profits and traded up to Kraft and Merck.