On Wednesday, June 17, Berkshire Hathaway exercised warrants it owned to purchase about 46.2 million Heinz shares. The purchase, which cost Berkshire only $462,000, makes Berkshire the majority shareholder with ownership of 52.5 percent of H.J. Heinz.
Berkshire’s ownership stake will be diluted once the merger of Kraft and Heinz goes through, however, Berkshire will still be the largest shareholder in the combined company.
The other major shareholder will be Brazilian private equity firm 3G Capital.
Kraft Heinz will be 51 percent owned by 3G Capital and Berkshire Hathaway. Kraft shareholders will own the remaining 49 percent. On June 9, a waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”), as amended, expired with regard to the proposed merger.
The expiration of the HSR Act waiting period satisfies one of the conditions to the closing of the proposed transaction, which remains subject to approval by Kraft shareholders, antitrust clearance in Canada and other customary closing conditions.
Heinz also received notice that the Canadian Competition Bureau has issued a “no action” letter indicating that the Bureau does not intend to challenge the companies’ proposed merger.
The deal is expected to close in the second half of 2015.
The combined company will have a portfolio of packaged food brands that includes Heinz ketchup, Philadelphia cream cheese, and Oscar Mayer meats.
Kraft has $18 billion in annual sales, employs 22,500 workers, and boasts that 98 percent of U.S. and Canadian households have Kraft products in their kitchens. Nine of Kraft’s brands have more than $500 million in annual sales, and 80 percent of sales are in categories where they hold the #1 or #2 market position.
Kraft Heinz will have $28 billion in sales with eight $1+ billion brands and five brands between $500 million-$1 billion.
© 2015 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.