Money Expect a repeat of the Kraft Heinz merger

19:56  04 march  2018
19:56  04 march  2018 Source:   Toronto Star

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3G Capital will look for more acquisitions, despite the mediocre track record of past efforts, writes David Olive.

Investment firms, 3G capital and Berkshire Hathaway, have teamed up to create a new company through the merger of H.J. Heinz Co. and The Kraft Foods Group. The new company thus created will be called The Kraft Heinz Company. In terms of annual sales, it is expected to be the fifth-largest

The 2015 merger of Kraft and Heinz has been a bust. Stock in Kraft Heinz has dropped by 13.5 per cent since the merger.© Toby Talbot The 2015 merger of Kraft and Heinz has been a bust. Stock in Kraft Heinz has dropped by 13.5 per cent since the merger.

The sobering lesson of Kraft Heinz

Quotes in the article

CSX Corp


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The new company, which will be called The Kraft Heinz Company, is expected to be the fifth-largest food company in the world and the third-largest in the U.S. Brian: There's obviously some better supply chain opportunities surrounding the Heinz / Kraft merger .

Kraft Heinz has a simple but effective formula for building a new global food giant: buy, squeeze, repeat . • While the mergers with Interbrew and Anheuser-Busch required the partners to dilute their stake, they still Analysts expect Kraft Heinz profits to increase by smaller percentages each year.

Berkshire Hathaway Inc


Canadian Pacific Railway Ltd


Canadian National Railway Co



In coming months, Kraft Heinz Co. is expected to make another blockbuster acquisition.

That will not be a high point in economic history.

The 2015 merger of Kraft and Heinz has been a bust. Stock in Kraft Heinz has dropped by 13.5 per cent since the merger. Revenues at the combined firm have flatlined and lately begun to fall.

Kraft Heinz is the brainchild of Warren Buffett and the three Brazilian billionaires whose private equity firm, 3G Capital, also merged Burger King and Tim Hortons. Tim Hortons, too, has entered the 3G model’s slow-growth phase.

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I predict that inevitably, legislation will require GMOs to be labeled, so sooner or later, Heinz / Kraft will need to label them or eliminate them from their products. As a result of consumer pressure, my vote is that they’ll start to remove these ingredients, and with the merger

For example, the expected timing and likelihood of completion of the pending merger , including the timing, receipt and terms and conditions of any required governmental and This communication may be deemed to be solicitation material in respect of the proposed transaction between Kraft and Heinz .

In his latest chairman’s letter to shareholders, released Feb.24, Buffett could cite many Berkshire Hathaway Inc. acquisitions whose sales and market share have increased, markedly in most cases.

The Berkshire method is to nurture growth at acquired companies, with adequate R&D budgets and funds for constant new-product development.

By contrast, 3G doesn’t nurture growth but simply buys it with high-profile acquisitions. 3G quickly strips out costs, and doesn’t stop to wonder why growth has stalled before making yet another huge acquisition.

3G’s answer to unmanageable size and lack of focus is to get still bigger. Making matters worse, 3G is doing this in the traditionally slow-growth food business, made still more challenging by changing consumer demands.

3G is also the world’s biggest brewer. Consumers are turning away from the mass-market blandness of Labatts Blue and Budweiser (and Heinz beans) in favour of locally made specialty foods and craft brews.

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Historical stock information for Kraft , which traded on NASDAQ with the ticker symbol "KRFT" prior to the completion of the merger , is available at our Stock Information page. Where can I find cost basis information relating to the common stock of The Kraft Heinz Company?

The merger between Kraft and Heinz will produce a food industry superstar. Since our ad is pulling, we will repeat it in precisely last year's form The offer equated to roughly 20 times Heinz expected earnings of .54 for 2013.

This cycle of mediocrity in business management will end, of course, when 3G eventually breaks itself up to “unlock underlying value,” as the boilerplate goes. At which point, the suppliers squeezed during the 3G years and the thousands of workers laid off, many in Southern Ontario, will wonder, “What was that all about?”

Answer: Apart from 3G as a drag on the economy, not much.

Rail chiefs are mending fences

The two giant North American railways where the late Hunter Harrison was most recently CEO have embarked on “apology tours” to assure alienated shippers that the causes of their annoyance with Canadian Pacific Railway Ltd. and later with CSX Corp. are being addressed.

During his tenure at each of those Big Four railways, the U.S.-born Harrison, who died in December at 73, imposed a cost-cutting regime that was remarkably effective at boosting efficiency and profitability.

There was a price to pay for that reinvention.

CSX was unpopular with its customers during Harrison’s brief CEO stint last summer. The new boss’s abrupt closing of rail yards and idling of “surplus” locomotives caused delays in the CSX system.

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The Kraft - Heinz merger announced Wednesday might be the strongest signal yet of the new world order shaping the packaged food industry. By joining forces, Kraft and Heinz executives expect to squeeze out .5 billion in annual cost savings by the end of 2017.

The merger of Kraft Food and Heinz brought forth the Kraft Heinz Company. With 13 brands valued at 500 million USD or more, it is one of the biggest companies in food processing industry across the globe.

In a recent interview, Jim Foote, Harrison’s successor as CEO of CSX, said, “I go to someone’s office with my hat in hand and say, ‘I’m sorry about last year, we screwed up and we didn’t do a really good job for you’.”

CPR is also mending fences with clients irked during Harrison’s four-and-a-half-year CEO tenure there, ending in January of last year when he moved to CSX.

Still, the unanticipated profitability that has characterized North American rail in the past two decades can be credited more to Harrison than anyone.

By the 1970s, rail operators were so bloated with costs and chronically insensitive to customers that rail’s viability was in question. And shippers that are honest with themselves about their earlier ways will tell you that Harrison’s “precision railroading” spurred them finally to offer their own customers rapid response times and flexible scheduling, in tandem with Harrison’s renaissance at no fewer than four major railways, including Canadian National Railway Co.

We’re waiting for the Rotman, Western University or Harvard case study on how this moribund industry was transformed into a consistent money-spinner, a tome that would be instructive to managers across the economy.

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MEGA MERGER : Kraft and Heinz combine to form the world's 5th-biggest food company. Here's why the recent stock market sell-off could save us from a repeat of "Black Monday" More "Intelligent Investing" ».

Predicted Twitter Response: Expect lots of retweets despite bathroom humor because the message about nutrition is important to folks and the naughtiness is softened by the silliness of it. [Update: Typo in last frame corrected].

As Britain heads into the most difficult round of negotiations with the European Union on the Brexit divorce, the E.U. is insisting that a post-Brexit Britain adopt either Canada’s or Norway’s relationship with the EU.

These are opposite ends of a spectrum.

The Canadian model is an “EU-light” association, while in crucial ways Norway is practically an EU member. The U.K. rejects both of those options, preferring a “bespoke” post-Brexit arrangement that Germany, France and the European Union have already dismissed as a non-starter.

With the new Canada-EU Comprehensive Economic and Trade Agreement (CETA), Canada now enjoys free trade in goods with the world’s biggest economy. But CETA provides little access to the EU in services.

Norway, by contrast, has complete access to the EU’s coveted single market. In return, Norway conforms with EU rules, European Court of Justice jurisprudence, and the EU’s cherished labour mobility.

Mobility is anathema to Brexiteers. The ill-fated Brexit referendum was an anti-immigration vote. The most strident Brexiteers are xenophobes who want an end to Polish workers easily getting jobs in Manchester, and will forfeit a Liverpool welder’s current ability to take a job in Krakow without need of a visa or work permit.

The EU won’t budge on the mobility principle.

But the U.K. government that won’t budge either is a fragile one. Jeremy Corbyn, the U.K.’s likely next prime minister if Theresa May’s shaky coalition government falls, has recently shown more signs of flexibility than May in conceding to some of the EU’s basic demands.

Which leaves what Michel Barnier, the EU’s chief negotiator, has called a “Canada Plus” solution. He hasn’t defined it, but in coming weeks Canada Plus will be defined. And it will likely offer Britain the continued single-market access it craves, but only if post-Brexit Britain embraces labour mobility, workplace and environmental protections and certain other EU social-justice standards.

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