ACCC may look at Heinz-Kraft merger

The competition regulator is watching the proposed merger of Kraft and Heinz and could act if it is likely to affect competition in the Australian grocery sector.

The AFR reports that the mega-deal is set to create the third-biggest food and beverage manufacturing company in North America.

A spokeswoman for the Australian Competition and Consumer Commission said it was "aware of the transaction. If it decides to conduct a public review, it will be listed on the ACCC's website."

The deal is set to create the third-biggest food and beverage manufacturing company in North America.

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.

According to the Australian, the merger is unlikely to result in one huge grocery supplier in the Australian market because Kraft split into two separate public companies (Kraft and Mondelēz International) three years ago.

Kraft focused on US groceries, while Mondelēz International concentrated mainly on biscuits, sweets and chocolates on the international market.

As such, Kraft doesn’t have a huge presence in Australia and doesn’t compete directly with many Heinz products.

If the Commission were to act, one possible course of action would be to enforce divestments.

Image: Reuters