(Bloomberg) — Kraft Foods Group Inc. will merge with H.J. Heinz in a deal orchestrated by 3G Capital and Warren Buffett’s Berkshire Hathaway Inc., creating the third-largest food and beverage company in North America.
Kraft shareholders will receive 49 percent of the stock in the combined entity, plus a cash dividend of $16.50 a share, the companies said in a statement Wednesday. Berkshire and 3G will invest $10 billion in the deal, which values Kraft at about $46 billion, before net debt, based on its stock price Tuesday and the cash payment investors will receive.
The merger creates a stable of household names — everything from Heinz ketchup to Jell-O — with revenue of about $28 billion. It also could presage more consolidation in the U.S. food industry, which is struggling to reignite growth. Buffett and 3G, the private-equity firm founded by Brazilian billionaire Jorge Paulo Lemann, previously teamed up to buy Heinz in 2013 and they cut costs, a strategy they aim to repeat with Kraft.
“3G has squeezed a lot out of Heinz and now they will do the same job at Kraft,” David Turner, an analyst at research firm Mintel, said in an interview. “When Buffett invests in a sector, it gives a sign that the sector is ripe for acquisitions. This will flag up other opportunities.”