Kraft and Heinz to merge, creating 3rd largest food company in US

By REUTERS
March 25, 2015 14:47

 
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Kraft Foods Group Inc, the maker of Velveeta cheese, will merge with ketchup maker H.J. Heinz Co, owned by 3G Capital and Warren Buffett's Berkshire Hathaway Inc, to form North America's third-largest food and beverage company.

Kraft's shares rose 34 percent to $82.50 in premarket trading on Wednesday.

The combined company, to be led by Heinz Chief Executive Bernardo Hees, will have revenue of about $28 billion, less than half that of market leader PepsiCo in 2014.

Kraft, like other packaged-food makers, is battling sluggish demand as consumers shift to products that are perceived to be healthier.

Kraft has overhauled its senior management over the past few months and has said it will develop products to meet changing consumer preferences.

The deal is unlikely to face antitrust hurdles as there is little overlap in the companies' products, analysts said.

Kraft sells cheese, Oscar Mayer meats, packaged meals and Maxwell House coffee, while Heinz makes ketchup, sauces and frozen foods.

The combined publicly traded company, expected to save about $1.5 billion in annual costs by the end of 2017, will have eight brands worth over $1 billion each, the companies said.

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