Kraft Foods Group, Inc.’s KRFT board of directors recently announced a regular quarterly dividend of 55 cents per share, payable on Jul 31 to shareholders of record as on Jul 27.
In this connection, the company stated that the dividend will be paid if the pending merger with privately owned ketchup maker, H.J. Heinz Company, does not close before Jul 27. Kraft announced a definitive deal to be acquired by Heinz in March this year to form The Kraft Heinz Company. In case the merger closes before that date, Kraft Heinz will declare and pay the dividend as soon as possible.
The board also declared a special cash dividend of $16.50 per share — as previously announced — payable to Kraft shareholders of record immediately prior to the effective time of the merger. However, the special dividend will be paid only if the merger gets through.
The merger, reportedly valued at $46 billion, is likely to create the third largest food and beverage company in North America.
The deal is being backed by Brazilian private equity firm, 3G Capital, and billionaire investor, Warren Buffet. Heinz is jointly owned by 3G Capital and Buffet’s Berkshire Hathaway, Inc. BRK.B. The investment companies acquired Heinz for $28 billion in 2013.
Kraft shareholders will own 49% stake in the combined entity. They will get one Kraft Heinz share against every Kraft share they own. The $10 billion special dividend to be paid to Kraft shareholders will be funded by an equity contribution by Berkshire Hathaway and 3G Capital. Heinz shareholders will own 51% stake in the new company.
The deal has been approved by the boards of both the companies and is awaiting shareholders’ approval and other customary closing conditions. The Canadian Competition Bureau has approved the merger and the waiting period under the Hart-Scott-Rodino (HSR) Act has also expired. A special meeting of shareholders to vote on the merger will be held on Jul 1.
Kraft has been struggling with its top line ever since it split from Mondelez International, Inc. MDLZ in 2012 due to broader macro pressures. The Heinz merger will bring popular consumer food brands like Heinz, Kraft, Oscar Mayer, Ore-Ida and Philadelphia under one roof. Kraft Heinz will own eight Billion Dollar brands and is expected to garner approximately $28 billion in revenues. The merger is likely to result in revenue synergies such as increased scale and additional shelf space. Additionally, Kraft’s brands will get exposure in the overseas markets leveraging Heinz’s international platform. This should improve sales at Kraft. Kraft Heinz is also expected to save $1.5 billion in annual costs by the end of 2017 gaining from increased scale and possibly aggressive cost cuts.
3G Capital, co-founded by Brazilian billionaire Jorge Paulo Lemann, is a global investment firm known for buying iconic brands and then growing them while aggressively slashing costs. It held approximately 70% stake in fast food chain, Burger King, before merging it with Canadian doughnut chain, Tim Hortons, to form Restaurant Brands International QSR, last year. In 2008, 3G Capital took over American brewer, Anheuser-Busch and merged it with Belgian-Brazilian brewer, InBev, to form Anheuser-Busch InBev SA/NV, the world’s largest brewer. 3G Capital had a significant stake in InBev.
Kraft carries a Zacks Rank #3 (Hold).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment