Shares of Kraft Foods Group Inc. surged as much 37% in premarket trade on Wednesday, after the news the food-and-beverage company is merging with H.J. Heinz Co, creating what the companies say will be the third-largest food and beverage company in the US.
The deal was engineered by Heinz's owners, the Brazilian investment firm 3G Capital, and billionaire investor Warren Buffett's Berkshire Hathaway.
The combined entity will be known as Kraft Heinz Co will be co-headquartered in Pittsburgh and the Chicago area. Under
terms of the deal, Kraft
KRFT
shareholders will own a 49%
stake in the company, and get a special cash dividend of $16.50 per
share.
Current Heinz shareholders will own a 51% stake.
The aggregate
special dividend payment of around $10 billion will be funded by an
equity contribution from Berkshire Hathaway Inc.
BRK.A
BRK.B and 3G Capital, which owns
Heinz.
According to a statement announcing the deal, the new food company's shares are expected to trade publicly.
