Kraft Foods Group has enjoyed a huge boost in its share price following news of its merger with US food giant Heinz.
Reports emerged yesterday that Brazilian equity firm 3G Capital, owner of brands such as Burger King and Heinz, was in talks with Kraft for a $40 billion (£27 billion) takeover. The Heinz transaction is in conjunction with billionaire investor Warren Buffett's Berkshire Hathaway and has already sparked a surge in share prices.
At the close of trading in New York on Wednesday (March 25th), Kraft saw its stock rise 35 per cent to $83.17. 3G Capital's deal affects shareholders on both sides and once completed, Heinz shareholders will own 51 per cent of the combined company while their counterparts at Kraft will have a 49 per cent interest.
Mr Buffett, Berkshire Hathaway chief executive, 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."
The transaction, which will create Kraft Heinz Company, aims to make annual cost savings of $1.5 billion by the end of 2017.
Key brands in the transaction
3G Capital's acquisition of Kraft brings together a number of iconic brands in both the US and UK markets. Kraft, Heinz and hotdog maker Oscar Mayer currently boast combined sales of around $29 billion. Popular products such as Kool Aid, HP Sauce, Philadelphia soft cheese spread and Planters peanuts have highlighted the value provided by all three organisations.
As part of the agreement, Kraft shareholders will receive a special cash dividend of $16.50 per share while a further dividend payment of around $10 billion is being funded by Berkshire Hathaway and 3G Capital.