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Kraft and Heinz to Merge in Deal Backed by Buffett and 3G Capital

Published on March 25, 2015, by

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Kraft Foods and H. J. Heinz, two giants of the American food industry, are merging in a blockbuster deal involving the billionaire Warren E. Buffett and the Brazilian investment firm 3G Capital, creating what will be the fifth-largest food and beverage company in the world.

In addition to its ketchup, Heinz sells sauces, soups, beans, pasta and Ore-Ida potatoes, among other food brands. Kraft’s brands include Jell-O, Kool-Aid, Lunchables, Maxwell House, Oscar Mayer, Philadelphia, Planters and Velveeta. The combined company will have revenue of about $28 billion, with eight individual brands each reporting sales of at least $1 billion a year, and five brands with between $500 million and $1 billion in sales.

Heinz, which is owned by 3G Capital, and Mr. Buffett’s Berkshire Hathaway will control 51 percent of the combined company, while Kraft shareholders, who must still vote to approve the deal, will own 49 percent.

Kraft shareholders will also receive a special cash dividend of $16.50 a share, or about $10 billion, to be paid for by 3G Capital and Berkshire. The dividend represents a 27 percent premium based on Kraft’s market value of about $36 billion on Tuesday. But in addition to the dividend, Kraft will hold a nearly 50 percent stake in a company worth more than $70 billion. Because Heinz is private, its equity value is not publicly known, but people briefed on the matter said the combined company is expected to be worth as much as $100 billion by 2017.

The stake owned by 3G Capital and Berkshire will remain privately held, while the rest of the company’s stock will be publicly traded on the Nasdaq. In time, some of the stock controlled by 3G Capital and Berkshire Hathaway could be sold to public shareholders, but the companies expect to retain effective control even if their equity ownership dips below 50 percent.

The combined company will have co-headquarters in the Chicago and Pittsburgh areas.

As he did in with Heinz, Mr. Buffett played a significant role in bringing the deal together. His company, Berkshire Hathaway, is investing alongside 3G Capital again, and will help pay for the dividend for Kraft shareholders.

“I am delighted to play a part in bringing these two winning companies and their iconic brands together,” Mr. Buffett said in a statement. “I’m excited by the opportunities for what this new combined organization will achieve.”

The deal marks a return to megadeals for Mr. Buffett, who has maintained that he is on the hunt for “elephants” — large companies he could incorporate into the growing Berkshire Hathaway conglomerate.

From its base in Brazil, 3G has become a powerhouse in the world of food brands. The firm, which counts the billionaire financier Jorge Paulo Lemann among its owners, has made daring moves for companies like Burger King, which it bought in 2010.

Kraft Foods’ one-day trading

 Kraft Foods’ stock price over the last six months.

Two years ago, 3G and Mr. Buffett — a public admirer of Mr. Lemann and his firm — teamed up to buy Heinz for $23 billion. Last summer, 3G, through Burger King, bought the Canadian coffee-and-doughnut chain Tim Hortons for about $11.4 billion, with the aim of creating a global fast-food empire whose offerings stretch from breakfast to dinner.

Plans to merge Kraft and Heinz have been in the works for years. When 3G Capital and Mr. Buffett took over Heinz, they identified Kraft as an ideal merger partner. Early this year, soon after John T. Cahill took over as chief executive, 3G and Mr. Buffett approached Kraft about a deal.

With 3G, Kraft will get management known for its cost-cutting skills and strategic acumen. Alex Behring, the managing partner of 3G will be chairman of Kraft Heinz, while Bernardo Hees, the chief executive of Heinz, will be the C.E.O. of the combined company.

The companies said they estimated they could find savings of $1.7 billion annually by the end of 2017 through cost reductions and efficiencies of scale. The combined company intends to pay a dividend, as Kraft does today, and increase it over time.

Kraft is the product of a 2012 split that created Mondelez International. The company has been wrestling with low margins and flat sales amid the shifting tastes of consumers.

Since the breakup, Kraft’s sales have been relatively flat at about $18 billion. Its overall profit last year fell 62 percent, to $1 billion, weighed down by the commodity costs of coffee, cheese and meat. The company has tried to cut costs and raise prices. But packaged-food companies as a whole have grappled with disappointing sales, owing to a drop in spending by lower-income customers and a change in tastes among more affluent buyers.

Kraft primarily sells in the United States, while Heinz is stronger internationally. Heinz Ketchup is globally reknowned, for example, and its HP brown sauce is popular in Britain and Germany and elsewhere in Europe. Kraft’s brands, like Jell-O and Oscar Meyer, have failed to translate internationally. Executives hope that Heinz’s global sales and distribution networks will help change that. Combining the two will also create a global foods powerhouse with strong sales to both consumers and commercial customers like restaurants.

But the deal may face antitrust scrutiny. Regulators in Washington are taking a harder line when evaluating potential mergers that reduce competition.

Because no debt financing was needed, the deal was orchestrated without the assistance of any big banks like JPMorgan, Bank of America, or Citigroup. Instead, Kraft was advised by Centerview Partners, a small boutique, while Heinz was advised by Lazard, the independent investment bank.

Lazard and the law firms Cravath, Swaine & Moore and Kirkland & Ellis advised Heinz. Centerview and the law firm Sullivan & Cromwell advised Kraft.

original article via: NYTIMES

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Large park, civic space proposed for Astrodome ($243 million)

Published on March 24, 2015, by

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$243M facility would include exercise and biking trails, indoor rock climbing and new underground parking.

A proposal to turn the iconic but shuttered Houston Astrodome into a massive indoor park and build a tree-lined green space around the structure could cost nearly $243 million, according to a report released Monday by a nonprofit research group focused on land use.

The report by the Urban Land Institute is part of an effort by officials in Houston’s Harris County as well as preservation groups and local residents to save the Astrodome from potential demolition.

A panel from the Washington, D.C.-based land institute had visited Houston and previously released some of the details of its plan in December.

“The panel concluded that the Astrodome can and should live on,” the land institute said in its final report.

The group’s report calls for creating a massive indoor park within the stadium, with spaces for exercise and biking trails and indoor rock climbing, as well as new underground parking. The outside areas around the stadium would be converted into tree-lined green spaces.

The land institute also said its plan would provide space that could be used by the Houston Texans and the Houston Livestock Show and Rodeo, both of which use NRG Stadium next door.

Harris County Judge Ed Emmett — who first proposed the idea for the indoor park last year — said county commissioners will review the report at its March 31 meeting.

“What is heartening about this is (the land institute) recognized the iconic nature of the building. They identified it as having the potential to be a grand space for the community,” Emmett said.

Emmett and other county officials in May plan to visit an airship hangar in Brandenburg, Germany, that has been converted into a giant indoor tropical theme park. Emmett said county officials hope to get some tips from their German counterparts.

The future of the structure has been in limbo since voters in 2013 didn’t authorize $217 million in bonds to turn it into a multipurpose special events center. While the Astrodome is not in any immediate danger of being demolished, local officials have struggled to find an alternative use. Over the years, some proposals — including a water park and a sports memorabilia museum — have not gained much traction, while others proposals have sought to demolish the stadium, which had become an eyesore in recent years but is now being cleaned up.

The land institute said its proposal would need to be paid through a private-public partnership.

Tom Eitler, vice president of advisory services for the land institute, said the $243 million price tag is just an estimate but “it gives a feel for the kind of money they will need to do these changes.”

Opened in 1965, the so-called Eighth Wonder of the World once housed MLB’s Astros and the NFL’s former Oilers, but hasn’t been home to a sports team since 1999 and has been closed to all events since 2009.

The world’s first multipurpose domed stadium is also under consideration for a “state antiquities landmark” designation from the Texas Historical Commission that would make it more difficult to tear it down.

The stadium’s most prominent use in recent years was as a shelter for Louisiana residents displaced by Hurricane Katrina in 2005. The National Park Service has added the Astrodome to its National Register of Historic Places.

original article via: sanduskyregister

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Instagram celebrates 300 million users with verified badges for VIPs

Published on December 10, 2014, by

Instagram has always been beloved by photographers, selfie-takers, and latte lovers, but now we can put its popularity in context: Instagram officially has more fans than Twitter.

The photo-sharing network has 300 million monthly active users compared to Twitter’s 284 million, despite the real-time news platform’s bigger profile. Of course, Twitter would argue it has a larger footprint than just monthly active users—CEO Dick Costolo has said the network reaches an additional 500 million unique visitors each month who never log into the network.

Like Twitter, Instagram is a celebrity favorite. Taylor Swift, Beyoncé, and hundreds of other stars use the network regularly to post behind-the-scenes snapshots of their lives. Now Instagram is going to verify those users, like Twitter does, with badges for VIPs and brands. You’ll see those roll out this week.

Instagram has attracted scammers and spam accounts since launching four years ago. The network hasn’t commented on its anti-spam efforts until now:

“We’re committed to doing everything possible to keep Instagram free from the fake and spammy accounts that plague much of the web, and that’s why we’re finishing up some important work that began earlier this year,” Instagram CEO Kevin Systrom said in a Wednesday blog post.

That work included the deactivation of spam accounts, but those accounts are now also being scrubbed from the network. If your follower count drops, that’s why.

Instagram has proved it has staying power, so now the big question is: Did Systrom sell too early? When Facebook acquired the app in April 2012, it was tiny: just 30 million users. That’s why Instagram’s $1 billion price tag seemed hefty at the time. But WhatsApp commanded $21.8 billion for its 450 million users when Facebook snatched up the messaging app earlier this year—perhaps Systrom and co. could’ve raked in a few more billion had they waited.

Then again, Facebook allowed Instagram to focus on building a solid user experience without worrying about making money, which the network is now slowly testing ads that don’t look out of place in your feed. And it looks like the two companies are enjoying their union, if Facebook posts are any indication:

original article via: PCWORLD