Heinz, Kraft announce massive merger

A jargon-laced joint press release assures shareholders and employees that both companies will retain their headquarters and identities.

Pending approval from regulators, Heinz and Kraft Foods will merge into the Kraft Heinz Co. a joint press release from the two companies announced Wednesday.

The combined company will be the third-largest producer of food and drink in North America, with annual revenues of about $28 billion. Warren Buffett’s Berkshire Hathaway and Brazilian company 3G capital are forking over $10 billion to help the merger happen.

Why are these two food giants merging? According to the release, “synergies.”

“The complementary nature of the two brand portfolios presents substantial opportunity for synergies, which will result in increased investments in marketing and innovation,” the release states.

Further down, it continues with more jargon:

The significant synergy potential includes an estimated $1.5 billion in annual cost savings implemented by the end of 2017. Synergies will come from the increased scale of the new organization, the sharing of best practices and cost reductions.

Notably, the release doesn’t specifically note that any job cuts will result from the merger. Maintaining each company’s identity seems to be a focus, too. For example, the combined company will be headquartered in both Pittsburgh (home of Heinz) and Chicago (where Kraft’s home office is).

The release states:

Understanding the need to preserve both Heinz and Kraft’s heritage in their respective hometowns of Pittsburgh and the Chicago area, the new company is committed to supporting local charities and community relationships in the communities in which they operate.

The release includes quotes from Buffett, 3G managing partner and Heinz Chairman Alex Behring, Kraft CEO John Cahill and Heinz CEO Bernardo Hees, all of whom say variations on how great the merger will be for shareholders and the brands under the two companies’ umbrellas.

Behring will become the chairman of the combined company. Cahill will become vice chairman, and Hees will be CEO.

Kraft Heinz will be home to eight $1 billion brands and five that make between $500 million and $1 billion, the release states. They include Heinz, Kraft, Oscar Meyer, Ore-Ida and Philadelphia.

What do you make of merger announcement?


Ragan.com Daily Headlines

Sign up to receive the latest articles from Ragan.com directly in your inbox.