Louisiana residents may find it interesting to learn that a merger has been announced between H.J. Heinz Co. and Kraft Foods Group Inc. If the merger is approved by the Federal Trade Commission the resulting business entity, the new Kraft Heinz Company, will be instantly catapulted to a position as the third-largest food manufacturer in the U.S.
Analysts expect the value of the newly merged company to be well over $80 billion. The Brazilian private investment group 3G Capital, which owns H.J. Heinz Co., coordinated the merger of the two food giants in collaboration with Berkshire Hathaway of Warren Buffett fame. Berkshire Hathaway and 3G have worked together in the past; in 2013, the two groups led a hostile takeover of Heinz to the tune of $28 billion.
Opinions have been split for and against the proposed merger. Not surprisingly, the dealmakers have touted the merits of the merger, claiming that merging the two companies will result in huge cost-cutting benefits via synergy potential and economies of scale by as much as $1.5 billion. Others, however, are doubtful, citing 3G’s history of cutting jobs to increase shareholder profits after their recent merger acquisitions. For example, after leading InBev’s takeover of the beer manufacturer Anheuser-Busch, 3G orchestrated the cutting of nearly 1,400 jobs.
More recently, 3G cut 600 jobs in North America after it acquired Heinz. Needless to say, many Kraft and Heinz employees will be watching with closely to what happens next if the merger is approved by the FTC. Additionally, a recent controversy noted that 3G may have relocated its Restaurant Brands International subsidiary to Canada from the U.S in order to legally avoid paying its fair share of taxes to the U.S. government.
Mergers and acquisitions are a complex area of business law involving multiple parties, regulators, negotiations and tough choices. During such negotiations it can prove invaluable to receive the guidance of a legal team experienced in representing business interests.
Source: Pacific Standard, “Why you should be paying attention to the proposed Heinz/Kraft merger,” Leah Douglas, April 8, 2015