Kraft Foods Group, maker of macaroni-and-cheese products, announced Wednesday that it would merge with H.J. Heinz Co., maker of the ketchup, to become the fifth largest food-and-beverage company in the world and the third largest in the U.S.
The new company, the Kraft Heinz Co., will be co-headquartered in the Chicago and Pittsburgh areas and will have revenues of roughly $28 billion, the companies announced in a statement Wednesday.
The new company will house several iconic brands such as Oscar Meyer meats, Velveeta, Jell-O, Kool-Aid, Planters and Philadelphia. Eight of its combined brands will be worth more than $1 billion each, while five will be worth approximately $500 million to $1 billion each.
Berkshire Hathaway Inc. and Brazilian private-equity firm 3G Capital, which co-own Heinz, will invest an additional $10 billion into the merged company, of which current Heinz and Kraft shareholders will collectively own 51 percent and 49 percent respectively. Kraft shareholders will also receive special cash dividends of $16.50 per share.
According to some estimates the merge will help create $1.5 billion a year in savings due to combined efficiencies and shared resources.
Berkshire Hathaway chairman and CEO Warren Buffett said in a statement. “This is my kind of transaction, uniting two world-class organizations and delivering shareholder value. I’m excited by the opportunities for what this new combined organization will achieve.”