Mothers who pack lunch for their kids may wonder whether cheese and ketchup really go together, but Heinz and Kraft just became a great combination, as 3G’s Jorge Paulo Lemann has had his way with them.
Or, as Reuters put it today, Wednesday: Ketchup maker H.J. Heinz Co, owned by 3G Capital and Warren Buffett’s Berkshire Hathaway Inc, is acquiring a majority stake in Kraft Foods Group Inc to create the third-largest North American food company, executives said on Wednesday.
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Kraft has had a very busy few years after its hostile takeover of Cadbury in 2010. Back then, Buffett disagreed with Kraft’s decision to sell its pizza brands to help pay for the takeover of Cadbury.
Buffett criticized then-Kraft CEO Irene Rosenfeld for the Cadbury transaction and the sale of the pizza businesses. “Both deals were dumb, ” he told Berkshire investors.
In 2011, Kraft Foods split into two publicly traded companies, with one focusing on its international snack brands like Trident gum and Oreo cookies and the other on its North American groceries business that includes Maxwell House coffee and Oscar Mayer meats. Kraft announced that Rosenfeld would stay on as chairperson of the $31 billion global snacking company, which was called Mondelēz International, Inc.
Tony Vernon, the president of Kraft Foods North America, will become CEO of the $17 billion North American grocery business, which will keep the Kraft Foods name.
Kraft has proven it is not change -resistant, so it accepted the takeover offer from 3G’s Lemann, who will combine the company with Heinz, currently owned by Berkshire Hathaway. Warren Buffett has a warm relationship with Lemann and 3G, and said, “we welcome the chance to work with them again, ” according to the Financial Times. 3G helped Berkshire with its acquisition of Heinz for $23.2 billion.
Kraft’s stock, which has been underperforming, rose on the news by 16.5%. Its current valuation is $36 billion, but the Financial Times reports 3G’s offer could value it at $42 billion. 3G helped Burger King out in its takeover of Tim Horton’s.
Former tennis star, Jorge Paulo Lemann is the richest man in Brazil, and his fortune is worth $25.2 billion. He had to flee the country when there were threats to kidnap his children in the 1990s. In his work for 3G, Lemann has a Midas touch when it comes to unlocking value for multi-nationals.