Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Kraft Foods Group (NASDAQ:KRFT) was up 39% -- and no, that's not a typo -- Wednesday as of 11:15 a.m. after it announced a definitive merger agreement with H.J. Heinz Company.
So what: Appropriately dubbed The Kraft Heinz Company, the resulting business will boast annual revenue of roughly $28 billion, including eight $1 billion+ brands and five brands worth between $500 million and $1 billion. That'll also make The Kraft Heinz Company the third largest food and beverage company in North America, and the fifth largest in the world.
Now what: Kraft shareholders, in particular, will receive a special cash dividend of $16.50 per share upon the deal's closing -- or 27% of Kraft's closing price as of yesterday -- as well as stock in the combined business representing a 49% stake in the new company. Current Heinz shareholders will own the remaining 51% on a fully diluted basis. Namely, that's Berkshire Hathaway (NYSE:BRK.B)(NYSE:BRK.A) and 3G Capital, the two of which teamed up to acquire Heinz in a $28 billion deal in early 2013. As part of the new deal, Berkshire and 3G are fully funding the aggregate special dividend payment with a new $10 billion equity contribution.
In the end, I think Berkshire Hathaway CEO Warren Buffet summed it up well:
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. I'm excited by the opportunities for what this new combined organization will achieve.