Kraft will merge with Heinz under the ownership of Warren Buffett's Berkshire Hathaway and private equity company 3G, in plans announced on Wednesday.
The new firm - to be called the Kraft Heinz company - will be 51% owned by Heinz and 49% by Kraft, with Berkshire and Brazilian private equity firm 3G Capital investing a further $10 billion to pay out as dividends to Kraft shareholders. More than $1.5 billion in cost-savings are planned as a result of the deal.
The new company will have $28 billion (£18.9 billion) in sales with eight brands accounting for more than $1 billion in sales.
Buffett said, “I am delighted to play a part in bringing these two winning companies and their iconic brands together. This is my kind of transaction, uniting two world-class organizations and delivering shareholder value.”
Both companies’ boards have unanimously approved the deal, which is targeted to close in the second half of the year, although it still needs approval from Kraft shareholders.
Kraft’s well-known brands also include Dairylea triangles, Maxwell House coffee and Capri Sun fruit juice, but it is best know in the UK for leading a hugely controversial hostile takeover of chocolate maker Cadbury in 2010. Kraft split into two companies in 2012, with Kraft Foods focusing on grocery products in the US and Mondelez International focusing on snacks and chocolates including Cadbury.
Private equity firm 3G Capital’s backers include Brazil’s richest man Jorge Paulo Lemann, a former tennis champion who once played at Wimbledon.
Speculation over the Kraft takeover immediately deflated shares in SABMiller, where investors had been hoping for a 3G bid. Lemann and his partners made their fortunes in investment banking and brewing after their AmBev concern was merged first with Belgium’s Interbrew and then the US firm and Budweiser brewer Anheuser-Busch to create AB InBev. SG still owns a 21% stake in AB InBev and was linked with a possible bid for SAB Miller.