Two of the best-known US food brands might soon unite in a deal that could reshape the industry — thanks in part to the efforts of a Brazilian investment firm with a penchant for deals.
The investment firm 3G Capital — through the ketchup maker HJ Heinz Co, which it owns with billionaire Warren Buffett — is in talks to buy Kraft Foods Group Inc, a person briefed on the matter said on Tuesday.
As of Tuesday’s market close, Kraft had a market value of about US$36.5 billion, meaning that a final price could exceed US$40 billion.
From its base in Brazil, 3G has become a powerhouse in the world of food brands. The firm, which counts billionaire financier Jorge Paulo Lemann among its owners, has made daring moves for companies like Burger King Worldwide Inc, which it bought in 2010.
Two years ago, 3G and Buffett — a public admirer of Lemann and his firm — teamed to buy Heinz for US$23 billion.
Many in the deal community and in Brazil have speculated about when the acquisitive firm would seek out another big-name consumer brand. Previous rumors had centered on companies like Campbell Soup Co.
Last summer, 3G, through Burger King, bought the Canadian coffee-and-doughnut chain Tim Hortons Inc for about US$11.4 billion, with the aim of creating a global fast-food empire whose offerings stretch from breakfast to dinner.
In the world of mergers and acquisitions, 3G has won acclaim for its prowess both in striking deals and in improving companies once it has bought them. The firm has a reputation for solid management and relentless cost-cutting.
At Burger King, for example, the firm sold off the restaurant chain’s corporate jet and did away with an annual US$1 million party in Italy.
Four months after Berkshire Hathaway Inc and 3G Capital’s takeover of Heinz, 11 of the top 12 Heinz executives were replaced. This was followed by a series of layoffs. In Kraft, Heinz and 3G would get their hands on a number of household names, including not only the namesake cheese, but also Oscar Mayer deli meats, Maxwell House coffee and Planters nuts.
The Kraft of today arose from the breakup of its parent in 2012, a split that created a primarily North American grocery business, which kept the Kraft name, and a global snacks business, Mondelez International.
Since the breakup, Kraft’s sales have been relatively flat at about US$18 billion. Its overall profit last year fell 62 percent, to US$1 billion, weighed down by the commodity costs of coffee, cheese and meat.
The company has tried to cut costs and raise prices. However, packaged food companies as a whole have grappled with disappointing sales, owing to a drop in spending by lower-income customers and a change in tastes among more affluent buyers.
Late last year, Kraft took Wall Street by surprise when it replaced chief executive Tony Vernon with chairman John Cahill.
News of a possible sale of Kraft was reported earlier by the Wall Street Journal.
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