3G Capital in talks to acquire Kraft Foods for $ 40 bn: reports

The Brazilian PE firm is said to be routing the deal through H.J. Heinz, which it bought in 2013

Brazilian private equity firm 3G Capital Partners is in talks to buy out global foods giant Kraft Foods for an estimated $40 billion, the Wall Street Journal reported Wednesday. 

The acquisition, if it goes through, will add heft to 3G Capital’s portfolio, which already includes H.J. Heinz, which it bought for $23.2 billion two years ago in collaboration with Warren Buffett’s Berkshire Hathaway, TIm Hortons, and Burger King. 

The Kraft deal is being routed through H.J. Heinz, the WSJ reported. 

Kraft owns several famed food brands including an eponymous as well as Oscar Meyer and Philadelphia brands of cheeses, Jell-O, Maxwell House coffee, and Planters nuts. 

Kraft Foods reported revenue of $18.21 billion in 2014, with processed cheese accounting for the largest chunk at $4.07 bn. However, revenue was essentially flat, while net profit fell 62% to $1 billion, the Journal reported, on account of higher commodity costs and charges related to post-employment benefits. Kraft also said it lost market share in 40% of its US businesses and was flat in the remainder.

A Reuters report said the two companies may be merged if the Kraft deal goes through. 

In 2010, Kraft Foods made an entry into the Indian market when it took over UK-based Cadbury Plc for about $18 billion. Kraft had made multiple unsuccessful attempts to enter the Indian market, when it finally closed a deal with Cadbury, which already has an extensive presence in one of the world’s fastest growing economies that includes a growing processed packaged foods market. 

3G has also acquired a few other big-name food companies, including Burger King in 2010 and Canadian coffee shop chain Tim Hortons in 2014. 3G’s co-founder Jorge Paulo Lemann was a big shareholder in brewer InBev, and helped engineer its 2008 acquisition of Anheuser-Busch, the Journal said.