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.