Billionaires Warren Buffet And Jorge Lemann To Merge With Kraft Foods, Eyeing For The 3rd Largest Company

Two of the world’s billionaires, Warren Buffet and Jorge Paulo Lemann, orchestrated a US$6 billion-merger deal ($7.7 billion) with Kraft Foods to establish the soon-to-be North America’s third largest food and beverage manufacturer, Kraft Heinz Co. Lemann’s H.J. Heinz Co’s merger with ready-to-eat food giant Kraft will have co-headquarters – Pittsburgh, Heinz’s bailiwick since 1869, and Chicago, Kraft’s base office.

The merger, which is also expected to establish Heinz Kraft as the fifth largest company in the international community, is estimated to have about $28 billion revenues and will be headed by Bernardo Hees, the incumbent chief executive officer of Heinz. Many analysts share a positive outlook about the merger especially after the fact that Kraft’s consumers are slowly gearing away from its products looking for healthier foods such as those which are less processed or organic. There were also announcements made by the company recalling some of its products for possible metal contamination.

3G Capital and Berkshire Hathaway will contribute $10 billion in the merger while the current shareholders of Heinz will have a collective ownership of the merger’s 51 percent shares of stocks. Kraft’s shareholders will receive cash dividend valued at $16.50 per share and 49 percent of the merger’s stocks.

Kraft’s Chance At Redemption

Despite efforts to come up with improved food products containing higher proteins, Kraft’s revenues continue to plummet, prompting its Chief Executive Officer John Cahill to release three of his senior executives. The inception of merger with Heinz came from Alex Behring, the 3G managing director who approached the former for a possible deal. Although Kraft did not abandon plans of adopting some changes, 3G Capital’s offer appears more attractive. In Heinz Kraft, Cahill will take the position of vice chairman and Behring will be the chairman. All companies expect to smoothly conclude the deal by second half of the year.

3G Capital is a global investment company owned by Lemann, Brazil’s richest man. Established in 2004, 3G Capital is reputed for its Burger King and Heinz acquisitions in 2010 and 2013 respectively. He is currently the 26^th richest man in Forbes’ list.

A conglomerate holding company, Warren Buffet’s Berkshire Hathaway owns half of Heinz’s shares, among others. The company, according to Forbes Global 2000, is the world’s fifth biggest public company.

Kraft’s product lines include Oscar Mayer meats and Velveeta cheese, to mention a few. It is listed a public company.

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