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Buffett backs Brazil private equity in March on giant US food brands

Food and Beverage

Heinz is to take over Kraft Foods to create a company valued at $100bn, including debt. The megadeal was engineered by Warren Buffet and Jorge Paulo Lemann of 3G Capital. It would result in the world's fifth-largest food and beverage company, with combined revenues of $28billion and a portfolio that includes eight $1bn-plus brands. The cash-and-stock transaction will see 49% of the new group go to Kraft shareholders, who will also receive a $10bn special dividend of $16.50 for each Kraft share. That sum will be paid by Mr Buffett and 3G, who will hold 51% of the new company. The deal is likely to presage significant cost-cutting at the merged company, with similar measures at Heinz now ensuring every $5 of sales yields a dollar of profit, a much higher margin than at Kraft, where chief executive John Cahill confessed last month that the company 'has not changed enough and certainly has not kept pace' amid shifting consumer demands. The tie-up is also likely to drive merger activity in the US food sector, following on from a spate of deals last year.

 

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