Warren Buffett and a private equity firm are combining Heinz and Kraft in a food industry mega-merger
Heinz and Kraft have just announced a merger that will make the unified companies into the third-largest food and beverage company in North America, according to a press release.
Kraft makes Velveeta cheese and Oscar Mayer meats while Heinz is known for its ketchup.
Once reports of the merger surfaced, shares of Kraft rose as much as 16.5% to $71.44 in trading after the bell on Tuesday, according to Reuters.
Here's the official release:
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.