Huge news in the food processing world today: today two titans of industry, H.J. Heinz and Kraft Foods Group, announced a definitive agreement to merge into The Kraft Heinz Company, a brand new entity that will be the third largest food and beverage company in the United States and the fifth largest in the world.
The agreement was reached through a unanimous decision by both Heinz and Kraft’s boards of directors, and H.J. Heinz—and thereby Warren Buffet’s Berkshire Hathaway, which only just acquired the company in 2013—is leading the charge, with Heinz shareholders taking on a 51 percent stake in the new entity while Kraft shareholders will own 49 percent. “I am delighted to play a part in bringing these two winning companies and their iconic brands together,” Buffet stated in a press release issued by Heinz this morning. “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.”
Indeed, each company on its own has achieved a lot over the years. Both Heinz and Kraft are iconic household names—Kraft on a national scale, with a host of well recognized brands from Oscar Mayer to Velveeta (to say nothing of its macaroni and cheese and Kraft singles cheese slices), and Heinz on a global scale with a broad portfolio of international brands. Kraft is hoping that this merger will help its North America brands reach new audiences overseas.
“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,” said John Cahill, Kraft Chairman and Chief Executive Officer. “We look forward to uniting with Heinz in what will be an exciting new chapter ahead.”
“We are thrilled about the unique opportunities this merger will create for our consumers worldwide, as well as our employees and business partners,” added Bernardo Hees, Heinz Chief Executive Officer. “Together, Heinz and Kraft will be able to achieve rapid expansion while delivering the quality, brands and products that our consumers love.”
Will this merger help Kraft reach a scale not seen since it spun off Mondelez International in 2012? Will this superhero team-up help both Kraft and Heinz take on growing competitors? And what will the Federal Trade Commission have to say about all of this? Stay tuned.