Heinz and Kraft announce merger

H.J. Heinz Company and Kraft Foods Group have announced they will merge to become The Kraft Heinz Company, forming the third largest food and beverage company in North America and the fifth largest in the world.

The new company will have revenues of approximately US$28 billion with eight brands worth in excess of US$1 billion and five brands between US$500 million-1 billion. Kraft shareholders will own a 49% stake in the combined company and current Heinz shareholders will own 51%.

Warren Buffett’s Berkshire Hathaway and 3G Capital will invest an additional US$10 billion in The Kraft Heinz Company, with Buffett describing the merger as “his kind of transaction”.

“I am delighted to play a part in bringing these two winning companies and their iconic brands together … uniting two world-class organisations and delivering shareholder value. I’m excited by the opportunities for what this new combined organisation will achieve,” said Buffett, one of the world’s most successful investors.

The combination of the iconic food companies joins together two portfolios of well-known brands, including Heinz, Kraft, Oscar Mayer, Ore-Ida and Philadelphia. Bernardo Hees, chief executive officer of Heinz, will be appointed chief executive officer of The Kraft Heinz Company.

It is estimated that the merger will result in an estimated US$1.5 billion in annual cost savings implemented by the end of 2017, with synergies resulting from the increased scale of the new organisation, the sharing of best practices and cost reductions