Kraft Foods Group, Inc. KRFT announced a major management shakeup ahead of its pending merger with H.J. Heinz Company to form The Kraft Heinz Company.
The senior leadership team at Kraft Heinz will be dominated by present executives from Heinz including Chief Financial Officer Paulo Basilio. He holds the same position at Heinz. Other important appointments include Matt Hill as Zone President of Europe; Marcos Romaneiro as Zone President of Asia Pacific; Francisco Sa, as Zone President of Latin America, and Emin Mammadov as Zone President of Russia, India and Middle East, Turkey & Africa. All of them hold similar executive positions at Heinz.
Kraft also announced the departure of six executives either upon completion of the merger or within 30 days. Others like Diane Johnson May and Tom Corley agreed to stay with Kraft Heinz for a few months but will leave before the year ends. The only Kraft executives who will continue with Kraft Heinz are George Zoghbi as Chief Operating Officer of Kraft Heinz’s U.S. business and Nina Barton as SVP of Marketing Innovation, Research and Development.
As previously announced, Bernardo Hees, the present CEO of Heinz, will remain in the same position in Kraft Heinz.
Kraft announced the definitive deal to be acquired by Heinz in March this year. 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 while also receiving a special cash dividend of $16.50 per share. Heinz shareholders will own 51% stake in the new company.
The deal has been approved by the boards at 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. This 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).
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