Please ensure Javascript is enabled for purposes of website accessibility

Why Kraft Heinz Is Selling Multiple Cheese Brands for $3.2 Billion

By Rhian Hunt – Sep 15, 2020 at 2:28PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company will keep a few cheese brands, but most will go to Lactalis.

Just hours after announcing a new, upbeat outlook and active strategic plan, Kraft Heinz (KHC -0.99%) made public a $3.2 billion deal to sell off many of its major cheese brands to Groupe Lactalis. The move is apparently part of Kraft Heinz's strategic streamlining of its business, with CEO Miguel Patricio saying in a statement the sale "is a great example of agile portfolio management at work."

The $3.2 billion Groupe Lactalis is forking over to acquire the food giant's "Natural, Grated, Cultured and Specialty cheese businesses" is nearly double the $1.8 billion the cheese brands added to Kraft Heinz's coffers over the past 12 months, according to the press release. The brands involved include the international branch of Cheez Whiz, along with the American branches of Cracker Barrel, Polly-O, Hoffman's, Athenos, Knudsen, and Breakstone's. There will also be a perpetual license for international production of Velveeta cheese.

Wedges of various kinds of cheese stacked atop one another.

Image source: Getty Images.

Lactalis is also taking over four production and/or distribution facilities in the United States. The facilities are slated to continue operating as normal and will keep the same workforce, simply with a different employer, according to Kraft Heinz. Kraft Heinz, for its part, is retaining a handful of cream cheese, processed cheese, and cheese sauce brands.

The company says it has earmarked its $3.2 billion cash infusion to pay down its debt. In its morning guidance report, Kraft Heinz stated it plans to reduce its net leverage to under 4 times by year-end, though at that time it only mentioned efficiency gains and reinvestment of conserved money into growth opportunities as the means to achieve that goal.

The Lactalis cheese deal will close in the first part of 2021, assuming it receives regulatory approval.

Rhian Hunt has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Kraft Heinz Company Stock Quote
The Kraft Heinz Company
$33.92 (-0.99%) $0.34

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.