The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.
Manchi Vamsi Krishna, MBA 2014-16, Vinod Gupta School of Management, IIT Kharagpur.
US food giant Heinz has announced its merger with Kraft Foods Group, creating the 3rd largest Food and Beverage Company in North America and the 5th largest in the world. The new company is called Heinz and Kraft Company and according to BBC, its combined sales will be worth $29 Billion with eight $1 Billion brands.
The deal was backed by billionaire investor Warren Buffet’s Berkshire Hathaway and Brazilian Investment Firm 3G Capital. Mr. Buffet, as quoted by BBC said, “I am delighted to play a part in bringing these two winning companies and their iconic brands together. This is my kind of transaction, uniting two world-class organisations and delivering shareholder value. I’m excited by the opportunities for what this new combined organisation will achieve.”
According to the terms of the merger, Heinz shareholders will retain 51% of the combined company while Kraft shareholders get the remaining 49%. Kraft shareholders will receive a special cash dividend of $16.50 per share as part of the deal. Mr. Alex Behring, chairman of Heinz will be the Chairman of the new company while Mr. John Cahill, chairman of Kraft Foods will be the Vice Chairman. Bernardo Hees, the CEO of Heinz will be the CEO of the new company as well.
The grocery market, already led by a handful of corporations has now got a new competitor on board. Only time will tell if this merger has got enough potential to survive the intense competition in the industry.