Heinz & Kraft’s giant merger may a ACCC scrutiny

In a deal backed by billionaire investor Warren Buffett and Brazil’s 3G Capital, H.J. Heinz Company and Kraft Foods Group have signed a merger agreement. This would see the formation of The Kraft Heinz Company, which, according to a recent statement from the H.J. Heinz Company, would be the third largest food and beverage company in North America and the fifth largest in the world.

“Significant synergy opportunities are seen with strong platform for organic growth in North America, as well as global expansion, by combining Kraft’s brands with Heinz’s international platform,” the statement said.

“The complementary nature of the two brand portfolios presents substantial opportunity for synergies, which will result in increased investments in marketing and innovation.”

The Kraft Heinz Company will have revenues of approximately $28 billion. Kraft shareholders will have a 49% stake in the new Kraft Heinz Company, while existing Heinz shareholders will collectively own 51% of the new company.

Within Australia, the proposed mega-merger between the H.J. Heinz Company and Kraft Foods Group, Inc. may be subject to scrutiny by competition regulator the Australian Competition and Consumer Commission (ACCC), with The Australian newspaper reporting that, according to an ACCC spokesperson, the regulator would look at the potential impact on the Australian grocery sector.

In 2012, Kraft Foods businesses in the Asia Pacific region, including Australia became known as Mondelēz International Australia (officially in July 2013), with a brand portfolio including Vegemite, Cadbury Dairy Milk, The Natural Confectionery Co, and Philadelphia. The Australian and New Zealand business had sales of $3.5 billion in 2013, while 3,500 employees work in Australia. Heinz had revenues of $534 million in Australia in 2013.

The 2012 move came as part of the global change when parent company Kraft Foods, Inc. split into two independent companies – Mondelēz International, Inc and Kraft Foods Group, Inc. While Mondelēz manufactures Kraft brands under licence, it left Kraft with little direct exposure to Australia. Mondelēz holds the trademark rights to Kraft products such as Vegemite, Kraft Peanut Butter and Kraft Singles in Australia.

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