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What a $46 billion grilled-cheese-and-tomato sandwich looks like

March 30th, 2015 by

Two of your pantry's best-known brands are merging - and Warren Buffett's leading the way

 
 
 

Kraft and H. J. Heinz just inked a $46 billion merger - and they're leaving the big banks out of it.

In what will go down as the largest merger of the last decade and quite likely the largest we'll see this year, Kraft and Heinz have opted to forego the inclusion of big banks - and even kept the number of financial advisors involved to a minimum.

Only Lazard Ltd. and Centerview Partners were brought in to share their expertise - potentially landing Lazard anywhere from $50 million to $60 million for their work and Centerview $75 million to $100 million for theirs. 

Meet the family

Food really does bring families together. As Kraft noted in a statement following the agreement, this is a deal that will make the new dual entity (Kreinz? We know - we're ge-ni-us!) the third-largest food and beverage company in North America and fifth-largest globally, with around $28 billion in combined revenues. Together, the two companies will also own eight $1 billlion brands and five more brands worth between $500 million and $1 billion. According to a Heinz graphic, the new family will include:

  • Lunchables
  • Bagel Bites
  • Philadelphia
  • Lea & Perrins
  • Mayo
  • Maxwell House
  • Velveeta
  • Smart Ones
  • Ore Ida
  • Jell-O
  • Planters
  • Classico
  • Oscar Mayer
  • Kool-Aid
  • HP Sauce

Shareholders might have been delighted at the news - particularly after seeing share price soar following the announcement. Kraft jumped more than 40 percent that trading day after losing 1.28 percent the day prior on the NASDAQ exchange. 

All the cheddar

Sheesh - we'd hate to be the big banks left out of that one. 

But who needs' em, anyway? According to Bloomberg, Kraft and Heinz are one of the few big merger deals having backers with enough wealth - 3G Capital and Warren Buffett's Berkshire Hathaway who each have an equal share in Heinz - to pen checks large enough to cover the purchase price without having to go through a big bank. 

And it certainly was a rather sizeable purchase price. Advisors valued Kraft at around $50 billion (which, evidently, was a $160 million job in itself). 

But it's not the price that matters; it's the value. Kraft and Heinz go together like - well, cheese and tomatoes. Crackers and soup. Peanut butter and mustard. You get where we're going with this. 

 

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