Kraft and Heinz agree to merger

Kraft has agreed to a merger with Heinz, which will create the third-biggest food and beverage manufacturing company in North America.

AFP and others report that Warren Buffett’s Berkshire Hathaway and Brazilian private equity firm 3G capital – the owners of Heinz – will own 51 per cent of the new entity, to be called The Kraft Heinz Company. Kraft shareholders will own the remaining 49 per cent.

Berkshire and 3D will make an extra payment of $US 10 billion to award a special dividend of $US 16.50 a share to shareholders of the listed Kraft. Heinz will again become a public company.

The deal was unanimously approved by the boards of both companies.

Estimated revenues for the new business would be worth $US 28 billion annually.

“This is my kind of transaction, uniting two world-class organisations and delivering shareholder value," said Buffett in a statement.

Fairfax reports that analysts predict cost cutting at the new company, which was seen after Berkshire and 3G acquired Heinz in 2013 for $US 23 billion. Further consolidation in the food and beverage sector also predicted.

"3G has squeezed a lot out of Heinz and now they will do the same job at Kraft," Fairfax reports David Turner, an analyst at research firm Mintel, as saying.

"When Buffett invests in a sector, it gives a sign that the sector is ripe for acquisitions. This will flag up other opportunities."

Consultancy Conlumino’s research shows the top three American food companies last year by sales were Pepsico, Nestle's North American division, and Coca-Cola.

Managing director of Conlumino, Neil Saunders, told the BBC that the new company would need to a better job modernising Kraft’s products, some of which appeared to be from the 1970s.

"The packaging isn't innovative, and the product hasn't really moved on," he said.

Image: Reuters

Filipino food group acquires Menora Foods

Filipino food group Monde Nissin Corporation has acquired privately owned Australian business Menora Foods.

According to the Australian, the acquisition cost about $55 million, although neither party would confirm that figure.

Menora Foods was established in Melbourne in 1967. One of Australia’s largest privately owned food marketing and distribution businesses, it markets over 1500 food products and distributes brands such as Wattle Valley cheeses and dips, Peckish rice snacks, Cobram Estate olive oil, and Maille mustard.

“I am very pleased to welcome the Menora Foods team and its partners into the Monde Nissin family. Monde Nissin aspires to be a significant foods and beverages player in the Asia Pacific region, we see Australia as a very important market that we should have a strong presence in, and Menora Foods with its marketing and distribution capability provides us with a very good strategic fit in achieving our vision,’’ Henry Soesanto, executive vice president of Monde Nissin Corporation, said.

“The combination of Menora’s own brands, Wattle Valley and Peckish as well as its leading agency brands, combined with Monde Nissin’s category leading Black Swan and Nudie brands, provides a solid platform within the Australian and export markets to support growth and new opportunities.”

As the SMH reports, the acquisition follows Monde Nissin Corporation’s purchase of Nudie Juices earlier this year and its purchase of dip maker Black Swan last year.

Hockey approves JBS’s $1.4 billion takeover of Primo

Brazil’s JBS has been given approval to acquire Primo Smallgoods.

The ABC and others report that treasurer Joe Hockey approved the $1.4 billion sale to JBS’s US subsidiary, with conditions that contact processors retain access to Primo (Australian Consolidated Food Holdings).

Under the conditions, JBS must ensure:

– “the Scone abattoir in NSW must remain open and retain its capacity for consignment killings accessible by third parties

– JBS reports to the Foreign Investment Review Board (FIRB) on its compliance every six months, and

– the transaction be reviewed in three years.”

Primo’s operations include five pig processing plants in Australia and New Zealand and about 3,000 employees.

Dow Jones reports that JBS will benefit from an Australian reputation for premium farm produce. It comes after last year’s China-Australia free trade agreement was reached, from which Primo would benefit through lowered tariffs for imported smallgoods.

The announcement came after the ACCC last month said it would not oppose the sale, as it would not substantially reduce competition in the beef processing sector.

Nationals Senator John Williams said this was evidence that competition laws were not doing their job against “creeping acquisitions”, he told the ABC.

“If you just go along buying one company, then another company, then another company, taking small steps, that's OK by the law,” he said.

"We need to change the law so that cannot happen because we're going to end up having two or three companies running this nation, which would be a disaster."

His concerns about reduced competition were highlighted by NSW Farmers Cattle Committee chairman Derek Schoen, who said that JBS and Primo were direct competitors, and prices for farmers would be pushed down.

“The acquisition of Primo by JBS will (make it) incredibly difficult for any new entrants to enter the market," Farm Weekly reports him as saying.

 

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