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Buffet and Brazilians in grocery deal

Brazil’s 3G Capital unveils $40 billion swoop on Kraft Foods

KraftBrazilian private equity company 3G Capital is behind a $40 billion (£27bn) merger of its Heinz business with grocery giant Kraft Foods Group.

The companies confirmed earlier speculation and it will mean Heinz, owned by 3G and Warren Buffett’s Berkshire Hathaway, will acquire  a majority stake in Kraft Foods Group to create the third-largest North American food company,

Kraft, headquartered in Chicago, controversially acquired Cadbury in 2010 in an £11.5bn deal funded by Royal Bank of Scotland that prompted an outcry over the ease by which British firms could be snapped up by foreign predators. The group later hived off the confectionery division into a separate company.

3G  swallowed Heinz, another iconic US food group, two years ago in a $28 billion deal in conjunction with Berkshire.

3G Capital is a multi-billion dollar global investment firm which was founded in 2004. Aside from the Heinz deal, the company is best known for its 2010 acquisition of Burger King, a $3.8 billion transaction.

Kraft Foods Group, whose brands familiar to British shoppers include Maxwell House coffee and Philadelphia cheese, is listed on the Nasdaq stock exchange in New York.

The Cadbury purchase was part of the long-term strategy of chairman and chief executive Irene Rosenfeld, who developed a three-year turnaround plan designed to drive the profitable growth of Kraft.

She targeted Brazil, along with India, as one its growth markets.

On 4 August 2011, Kraft Foods announced it would be splitting into two companies from 1 October 2012. The confectionery business of Kraft became Mondelez International, of which Cadbury is a subsidiary.

Since the breakup, Kraft’s sales have been relatively flat at about $18 billion. Its overall profit last year fell 62% to $1bn, weighed down by the commodity costs of coffee, cheese and meat.

 

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