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A big business merger was announced this week, and you are here to walk us through it this morning.

Mellody: It is certainly a big deal, Tom! Kraft and Heinz, two giants in the consumer packaged goods sector, are going to merge to create the world’s fifth largest company in the food and beverage space. Kraft foods, based in Chicago, is a public company while ketchup maker H.J. Heinz Co. has been owned for the past two years by 3G capital and Berkshire Hathaway following a takeover. The combined company will have revenue of about $28 billion, and is expected to have a valuation of over $100 billion by 2017.

Why did these companies merge?

Mellody: There are a number of reasons. First of all, there are many efficiencies that can come out of this. Both Berkshire Hathaway and 3G have said that these two companies have synergies that can be exploited, and the merger will reportedly save around $1.5 billion in annual costs by the end of 2017. In addition, the deal is expected to help Kraft expand sales of its brands in foreign markets as it takes advantage of Heinz’s distribution channels overseas. However, I think the key to the deal is that the new arrangement will allow these companies to rethink their current product offerings. At present, Heinz and Kraft are struggling to keep up with evolving consumer tastes. In the U.S. and globally, consumers are moving toward healthier options, and you can bet that Warren Buffett and 3G Capital will be pushing the new company to confront these challenges.

Money Mondays: The Kraft-Heinz Merger And Why You Should Care was originally published on blackamericaweb.com

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