Canadian, U.S. regulators clear Heinz and Kraft merger

Antitrust regulators in both Canada and the U.S. have fixed their seals of official inaction on ketchup giant H.J. Heinz’s play for control of Kraft Foods Group.

Canada’s Competition Bureau has confirmed that it wrapped its review of the proposed deal and issued its “no action” letter to the companies on Wednesday.

A “no action” letter, in such deals, confirms the bureau will not challenge the proposed transaction at Canada’s Competition Tribunal, as per the merger provisions of the federal Competition Act.

The bureau, in its review, is “satisfied that the proposed transaction is unlikely to result in a substantial lessening or prevention of competition in any relevant market in Canada.”

The decision follows the expiration Tuesday of the U.S. government’s mandatory waiting period on the Heinz/Kraft deal, as per the federal Antitrust Improvements (Hart-Scott-Rodino) Act.

Among other closing conditions, the deal now requires a vote by Kraft shareholders, scheduled for a special meeting on July 1, Kraft said in a release Wednesday.

The deal calls for Heinz to take a 51 per cent stake in what would be called the Kraft Heinz Co., giving Kraft shareholders one share in the combined company plus a special US$16.50 cash dividend for every Kraft share held.

The deal, which gives Kraft stakeholders 49 per cent of the new company, is expected to create North America’s third-largest food and beverage company, and the world’s fifth largest.

Market analysts previously predicted a Heinz/Kraft pairing wouldn’t face any major antitrust hurdles as the two companies have relatively little overlap in their product lines.

Kraft, whose facilities in Canada include two processing plants and three distribution centres, has cheeses, processed meats, packaged meals and coffee in its product lines. Heinz, whose assets include two processing plants in Ontario, is well known in ketchup, sauces and frozen foods.

The deal is seen as giving Heinz access to the Kraft brands, which are believed to be in 98 per cent of North American households. Heinz’s international infrastructure, in turn, is expected to help capitalize on “untapped opportunity” overseas for the Kraft lines.

Combined, the Kraft Heinz Co. would have eight brands it estimates as worth over US$1 billion each, including Kraft, Heinz, Oscar Meyer, Philadelphia, Velveeta, Lunchables, Maxwell House and Planters, and five other brands worth over US$500 million each, including Jell-O, Kool-Aid, Cracker Barrel, OreIda and CapriSun. — AGCanada.com Network