One Of The Largest Mergers Of 2015 Was The Merger Of The

1364 WordsJan 22, 20176 Pages
One of the largest mergers of 2015 was the merger of the companies Kraft and Heinz. The primary shareholders of Heinz - 3G Capital and Berkshire Hathaway, own about 51% of the total shares of the new company while Kraft owns the remaining shares. The merger of these two food giants, collectively known as The Kraft Heinz Company (KHC) was finalized at a whopping sum of $45 billion making it the third largest food and beverage company in North America. The company is co-headquartered in both Pittsburg and Chicago to help retain its relationship with their respective communities. The costs associated with the merger are fully funded by Berkshire Hathaway and 3G Capital and therefore the merger doesn’t impact the level of debt for the new…show more content…
They’re now able to strike better deals with their suppliers and distributers. In the past, 3g Capital has proven its ability in achieving cost cutting with Heinz, and with Kraft in the picture, it’s time to prove their tried and tested formula yet again. As a result, cost synergies are achieved due to the savings in transaction costs. The company would now be in a better position to bargain with their outlets due to the sheer volume and retail outlets are likely to offer more shelf space to the products offered. Centralized procurement of raw materials and inventory needed for packaging helps in the reduction of costs to a great extent. In addition to better sales opportunities, the combined company now has the opportunity to refinance its debts, because of the high credit approval ratings of Kraft. This in turn helps the total cost of capital to reduce significantly. Manufacturing plants and labor had to be reassigned to better suit the new company’s goals and budget. 3G Capital has been known for its ruthless measures in cost-cutting. Soon after the merger, the company announced that production would be consolidated and as a result, 7 plants would be shut down. This meant that several thousand employees had to be let go. It wasn’t a number that could be ignored by the cities. In turn, states and labor unions tried to strike a deal with the company by offering incentives for
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