Kraft Heinz merger to save $1.5 billion a year by 2017

posted by Marino Donati
25 March 2015

Food companies Kraft and Heinz are to merge in a move that will see the new company aim to cut $1.5 billion (£1 billion) from its cost base.

The companies said the deal would create significant synergy potential, including 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 organisation, the sharing of best practices and cost reductions.

The merged company, to be headquartered in Pittsburgh, US, will be called The Kraft Heinz Company, and will have revenues of around $28 billion (£19 billion). Its brands include Heinz, Kraft, Oscar Mayer, Ore-Ida and Philadelphia.

The merger also involves a $10 billion (£6.7 billion) investment from Berkshire Hathaway and 3G Capital. Existing Heinz shareholders will own 51 per cent of the new company, with Kraft company shareholders owning the remaining 49 per cent.

Alex Behring, chairman of Heinz and the managing partner at 3G Capital, said: "By bringing together these two iconic companies through this transaction, we are creating a strong platform for both US and international growth.”

The transaction is subject to approval by Kraft shareholders, receipt of regulatory approvals and other closing conditions and is expected to be finalised in the second half of the year.

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