According to the terms of the deal, the current shareholders of Heinz will hold a 51% stake in the newly formed company. These shareholders include 3G Capital and Berkshire Hathaway. The remainder will go to the current shareholders of Kraft. To sweeten the deal for Kraft’s shareholders, they have been provided a one-time cash dividend of $16.50 per share.
The cost of this dividend, which amounts to $10 billion, will be borne by 3G Capital and Berkshire Hathaway. This will be paid out as soon as the deal is finalized. The amount of this dividend is more than a quarter of the closing share price of Kraft on March 24. Each share of the Kraft Foods Group will entitle the shareholder to one share of the new entity. The shareholders will however have to be more patient to enjoy the full benefits of any improvement in operations of the combined entity, since the transaction is expected to be EPS accretive only by 2017. The agreement to form a new company was unanimously approved by both the companies’ board of directors. The deal has been valued at around $45 billion. The combined company will have annual sales revenue of approximately $28 billion.
1. The merger has been agreed by the boards of both companies, with approvals by shareholders and regulatory authorities.