FiveTakaways From Kraft-Heinz Merger Agreement
The background to one of the year’s biggest mergers – the combination of Kraft Foods Group Inc.KRFT -1.00% and H.J. Heinz Co., valued at more than $50 billion – was revealed in SEC filings Friday afternoon.
MoneyBeat took a look at the merger agreement and found five key revelations for our readers.
It came together quickly: Heinz chairman Alexandre Behring first approached Kraft CEO and chairman John Cahill about arranging a meeting on Jan. 20. Mr. Cahill had just taken over the top spot at Kraft in December. On Jan. 27, Mr. Cahill reviewed with Centerview Partners, Kraft’s investment bankers how the company would fare as a standalone entity before meeting with Mr. Behring the following day in Wheeling, Illinois.
On Jan. 29, the Centerview bankers met with Mr. Behring in New York. At that time, Mr. Behring told the Centerview bankers that Heinz and 3G planned to make an offer for Kraft. Roughly two months after that initial phone call, the deal was announced.
Deal terms — before and after: Heinz and 3G initially said it would make $10 billion equity investment in Heinz and give Kraft shareholders a special dividend of $12.50 per share and a 47% stake in the combined company. Two offers later, Heinz and 3G kept the $10 equity investment the same but upped the special dividend to $16.50 per share and ultimately gave Kraft shareholders a 49% stake in the combined company.
Kraft whittled down the termination fee: Kraft initially would pay a $1.8 billion termination fee if it couldn’t get its shareholders to approve the deal. After some back and forth, the new termination fee payable by Kraft to Heinz is $1.2 billion.
Other bidders look unlikely to emerge: Kraft contacted two other companies about potential deals after Heinz made its overtures. Mr. Cahill met the CEO of “Company A” on March 4, a few weeks before the Heinz deal was announced. No specific discussion took place about a potential deal. The representative of “Company B” didn’t have time to meet anytime in March and suggested April instead.
Centerview has a big payday: The merger agreement says that Centerview could receive an aggregate fee ranging from $49 to $60 million. According to research firm Dealpoint Data, at the high end of the range, it would be one of the largest fees in the past two years. In most other cases, the adviser fees were split among several banks, but Centerview was the sole banker to Kraft on this deal.