- 3G Capital Partners LP and Berkshire Hathaway Inc.'s H.J. Heinz Co. has signed a merger agreement with Kraft Food Groups, Inc. to create The Kraft Heinz Co., a deal that The Wall Street Journal reported last night could be worth more than $40 billion.
- Kraft shareholders will have a 49% stake in the merged company, Heinz shareholders at a 51% stake. The Wall Street Journal reports Kraft shares ticked up 32% Wednesday to $80.84 in morning trading.
- The merger would result in North America's third-largest food and beverage company and the fifth-largest food and beverage company in the world.
Creating innovative products to keep up with consumer preferences isn't the only strategy processed foods companies have to remain competitive in today's market, and the results of this merger could be the latest example. The Wall Street Journal notes 3G is "an acquisitive Brazilian firm known for buying consumer companies it considers bloated and aggressively slashing costs," and the firm was hungry for a new deal after raising $5 billion to start one. Heinz is a perfect example, as it has become lighter and leaner since 3G acquired it in June 2013, including decreasing its number of plants. If 3G sticks with its modus operandi, Kraft could see some major changes in terms of costs and internal spending to improve their bottom line.
These two companies wouldn't be anywhere near the only processed companies pursuing cost-cutting measures as of late either. In terms of plant closures alone, last week Kellogg announced it would close an undisclosed cereal plant, preceded by Post Holding Inc.'s announcement to close a PowerBar plant in Boise, ID, as well as Coca-Cola Hellenic Bottling Co. AG and PepsiCo Inc.'s decision to close one Russian plant each — and that's just this month.