One of the worlds richest and one of the best investors,Warren Buffet, is on the way to build a food empire. Ketchup maker Heinz, backed by Berkshire Hathaway Inc, which is own by Warren Buffet and the private equity firm 3G Capital, which is own by Brazil`s richest man, Jorge Paulo Lemann, will combine with Kraft Foods Group Inc (KRFT.O).
It is a $46 billion deal and that makes it the third largest North American food company. The transaction will create a global food behemoth with annual sales of $28 billion, and Heinz ketchup, Maxwell House coffee, Polly-O Cheese and Jell-O desserts will be some of the brands under its corporate umbrella.
The complicated deal will result in Heinz shareholders owning 51 percent of the company, and Kraft shareholders getting 49 percent. Owners of Kraft shares will also get a hefty $16,50 a share special dividend, funded by the Brazilian firm 3G and Berkshire.
Kraft Heinz will be the fifth-largest food company in the world.
Warren Buffet has long said he want to do more «elephant»-style deals with all the money he has on hand. I think he like food and beverage, because both 3G and Bershire has been fairly acquisitive over the past few years.
They bought Burger King and Tim Hortons, as well as Heinz.
The Dow was losing 300 points today and momentum stocks getting hit harder, so why was the legendary investor Warren Buffet so hungry today, and why hasn`t he lost faith in stocks?
Fist of all; M&A now is lucrative, given ample liquidity and still low-interest rates globally. This is not only happening in the food and beverage industry, but also in tech, health care and biotech industries. I wouldn`t be surprised if that stock catches a further bid on this M&A news.
Berkshire will own more than 300M shares of the new firm and will have paid less than $30 each for them. Naturally, The Oracle has no intention of taking profits. «You won`t see Berkshire reduce is interest,» says Buffet.
«We will be in this stock forever.»
The new company will be publicly traded under the name Kraft Heinz Co, and it expects to save about $1,5 billion in annual costs by the end of 2017. Jorge Paulo Lemann, and his company 3G, has a reputation for introducing aggressive cost cuts at other companies.
Kraft Foods Group Inc is up 35,62% today. Trading at $83,17. Berkshire Hathaway Inc is trading at $217,000 today. EPS; 12,090,84, with a market cap of 356,07B.
It is a shift in the market at the moment as consumers are demanding more healthier food.
Maybe Warren Buffet and Jorge Paulo Lemann will do something with that?
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