Merger & Acquisition

Background of the two companies

Kraft Foods Group Inc. is one of North America’s largest consumer packaged food and beverage companies. The company’s iconic brands include Kraft, Capri Sun, Jell-O, Kool-Aid, Lunchables, Maxwell House, Oscar Mayer, Philadelphia and Velveeta. It was acquired by Philip Morris Companies Inc. in December 1998. Philip Morris acquired General Foods Corporation prior to Kraft Foods and combined the two companies under a new subsidiary called Kraft General Foods Inc. Both companies operated separately until early 1995, the two units were merged as Kraft foods. In December 2000, Philipp Morris purchase Nabisco Holdings Corp., merging it into Kraft Foods. Kraft food purchased Cadbury in February 2010 with the aim of transforming Kraft into a higher growth, higher margin company by building global powerhouse in snacks, confectionery and quick meals. After Kraft went to acquire Cadbury, Kraft’s’ sales went down due to the high integration cost.  In August 2011, Kraft Foods announced its plan to split the two food publicly traded companies, Mondelez International as specializing in snack food and Kraft foods specializing in grocery items.

Heinz is one of the world’s leading marketers and producers of healthy, convenient and affordable foods specializing in ketchup, sauces, meals, soups, snacks and infant nutrition. It is a global family of the leading branded products such as Heinz ketchup, sauces, beans, soups, pasta and infant foods that represent over one third of Heinz’s total sales, Ore-Ida potato products, Weight Watchers Smart Ones entrées, T.G.I. Friday’s meals & snacks, and Plasmon infant nutrition. Heinz is reputable for its iconic brands on six continents, showcased by Heinz ketchup, known as the world’s famous ketchup.

How the merger came about

Warren Buffett, CEO of Berkshire Hathaway Inc. had plans to merge Kraft and Heinz when he bought Heinz in June 2013 together with a global investment firm, 3G Capital. They identified Kraft as an ideal partner and made the merger announcement on 25 March 2015 and merger completion on 2 July 2015. Motivation factors leading to the merger are as follow:

One of the world largest food and beverage conglomerates – Once both companies merge, they will create the third largest food and beverage company in North America and 5th largest food and Beverage company in the world. They forecast to have nearly $28 million in annual sales and expected to have a market value of more than $80 billion (Kraft & Heinz to merge in Deal Backed by Buffet and 3G Capital).