The Kraft Heinz Company (NASDAQ: KHC) has just announced a strategic move to separate into two independent, publicly traded companies, with a focus on accelerating profitable growth and unlocking shareholder value.
The two resulting companies will be "Global Taste Elevation Co." and "North American Grocery Co." "Global Taste Elevation Co." is projected to have approximately $15.4 billion in 2024 net sales and approximately $4.0 billion in 2024 adjusted EBITDA, with approximately 75% of net sales coming from sauces, spreads, and seasonings. On the other hand, "North American Grocery Co." is expected to have approximately $10.4 billion in 2024 net sales and approximately $2.3 billion in 2024 adjusted EBITDA, with approximately 75% of net sales coming from brands that are #1 or #2 in their respective categories.
The strategic rationale behind the separation is to provide both companies with more strategic and operational focus, reduce operational complexity, and customize capital allocation based on the strategic ambition of each company. Management aims to maintain investment-grade ratings for both companies while ensuring the current dividend level is expected to be maintained.
The proposed separation is intended to be tax-free for Kraft Heinz and its shareholders. The company anticipates up to $300 million of dis-synergies, with clear opportunities to mitigate a substantial portion of these in the near term. The transaction is expected to close in the second half of 2026.
Carlos Abrams-Rivera will continue to serve as CEO of Kraft Heinz and will become CEO of "North American Grocery Co." upon completion of the separation. The company has also announced the appointment of Miguel Patricio, the current chair of the board, as the executive chair. Additionally, a separation committee has been formed to oversee the execution of the proposed separation.
The company's financial advisor for this transaction is Centerview Partners, and legal advisors are Paul, Weiss, Rifkind, Wharton & Garrison LLP and Skadden, Arps, Slate, Meagher & Flom LLP.
The separation announcement comes after a strategic review conducted by the company's board of directors and executive leadership team, guided by the principles of delivering long-term sustainable value creation, preserving financial discipline, maintaining relevant scale, maximizing the value of the iconic brand portfolio, and preserving attractive capital returns while preserving balance sheet flexibility.
The separation announcement has sparked significant interest, and Kraft Heinz will be hosting a live question-and-answer session with analysts to discuss the transaction further. The market has reacted to these announcements by moving the company's shares -7.55% to a price of $25.8572. For more information, read the company's full 8-K submission here.
