What Happened to The Kraft-Heinz Merger?
The merger between the H.J. Heinz Company and Kraft Foods Group was approved by each company’s Board of Directors and shareholders in the beginning of 2015. In July of 2015, investors 3G capital and Berkshire Hathaway teamed up to create the new Kraft Heinz Company, of which they held a 51% stake in.
As a publicly traded company, other shareholders of Kraft, would hold the remaining 49% of Kraft Heinz. In addition, each share owned of the Kraft Foods Group company, prior to the merger, would equate to exactly one share of the new company. These additional shareholders would also receive $10 billion in total dividends, which equated to about $16.50 per share, paid by both 3G Capital and Berkshire Hathaway. The expectations for this new firm were immense, as shareholders anticipated large returns, decreased costs, and a larger influence around the world.
3G Partner Alex Behring & Architect of the Kraft/Heinz Merger
As a completely new firm, new executives would need to be appointed. Using the old companies’ respective executives to do so is a path that many post-merger firms choose to take, and Kraft Heinz was no different. Bernardo Hees, CEO of Heinz prior to the merger, was appointed CEO for the newly-formed Kraft Heinz Company.
Alex Behring was appointed Chairman, and John Cahill, Kraft’s CEO prior to the merger, was appointed Vice Chairman. But, Behring & Hees are private equity executives with backgrounds in financial engineering. Though both are brilliant individuals, they are investors at the end of the day.
Due to Heinz’s global reach, the combination of the two companies aimed to increase revenues and profits by bringing some of Kraft’s big-name products, such as A.1, Velveeta, MiO, Lunchables, and Planters, to the international market. They also envisioned cost cuts, which would come in the form of reducing human capital, as well as better opportunities for bargaining with retail outlets, restaurants, and food companies.
Fast forward to 2019, and Kraft Heinz has not performed nearly as well as expected.
Instead, the company has been losing a significant amount of steam, and is causing analysts and shareholders to rethink the future of the company. Many analysts believe that instead of adapting to changing consumer preferences, Kraft Heinz focused heavily on cost-cutting, alienating their market, and taking steps backward in the growth of their company.
Nowadays, healthier alternatives to everyday snacks are becoming increasingly popular, and Kraft Heinz has missed the boat in pursuing acquisitions of branded companies in this sector such as Amplify, B&G Foods, and Pinnacle, who own SkinnyPop, Pirate’s Booty, and Smart Balance, respectively.
The aim of financial engineering profits by merging two great American consumer brands failed due to a consumer's preferences changing faster than anyone had anticipated, including Warren Buffett.
Amidst these operational issues, Kraft Heinz has also faced some legal and structural issues. The SEC recently launched an investigation into Kraft Heinz for procurement misconduct, forcing the firm to restate its financial statements for both fiscal years 2016 and 2017, and raising questions about the firm’s accounting processes.
CEO Bernardo Hees is also said to be stepping down on June 30, and will be replaced by Miguel Patricio, Anheuser-Busch’s chief marketing officer. While Kraft Heinz’s future may be in question by analysts, shareholders, and the public alike, an outsider may be just what the firm needs to change the direction of its business, and meet the expectations set for the 2015 merger.
Warburg Pincus Vice Chair Bill Janeway Talks With Rebellion Research:
Trading Legend & Largest Oil Trader in the World from 1987-2001 Mark Fisher:
Interview with NASA Astronaut Scott Kelly: An American Hero
13 Questions With General David Petraeus
Why Choose Machine Learning Investing Over A Traditional Financial Advisor?
Interview With Home Depot Co-Founder Ken Langone
Interview with the Inventor of Amazon's Alexa
Automation and the Rebirth of American Retail
China Debuts Stealth Unmanned Combat Aerial Vehicle
Sweden's Economy Embraces AI & Automation
Austria's Automated Ai & Robotic Future Is Now
Nuclear Submarines: A 7,000 Lb Swiss Watch
Ai Can Write Its Own Computer Program
On Black Holes: Gateway to Another Dimension, or Ghosts of Stars’ Pasts?
Egypt's Artificial Intelligence Future
Supersonic Travel: The Future of Aviation
Shedding Light on Dark Matter: Using Machine Learning to Unravel Physics’ Hardest Questions
When High-Tech Meets Low-Tech Economy: Ai & the Construction Industry
Aquaponics: How Advanced Technology Grows Vegetables In The Desert
The World Cup Does Not Have a Lasting Positive Impact on Hosting Countries
Artificial Intelligence is Transforming the Forex Market
Do Machines Dream? Inside the Dreams of a Machine
Can Ai Replace Human Ski Coaches?
Faster than Sound and Undetectable by Radar
The Implications of Machine Learning on Condensed Matter Physics & Quantum Computing
Crafting Eco-Sustainability: WTC and Environmental Sustainability
Argentina's AI Future: Reversing a Century of Decline
Tennis & Artificial Intelligence
Peru's Ai Future Will Drive Economic Growth
The Colombian Approach to the AI Revolution
How AI Can Explain Its Thinking
Brazil & Artificial Intelligence
Can Ai Replace Human Ski Coaches?
Written by Matthew Durborow, Edited by Themis Pappas & Alexander Fleiss