Ketchup maker Heinz is buying Kraft Foods, a move that will create the world's fifth largest food and beverage company.

The $46 billion deal, which company executives said was sealed in only about four weeks, will bring together some of America's popular food brands such as Kraft's Macaroni and Cheese, Jell-O, Maxwell House Coffee and Planters and Heinz's Lea & Perrins and Ore-Ilda.

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Kraft shares surged more than 33 percent Wednesday at the stock market.  Under the deal, Kraft shareholders will get 49 percent stake in the new Kraft Heinz Company, while Heinz shareholders will own 51 percent of the new firm. 

Top executives said apart from their stake, Kraft shareholders will also receive a special dividend of US$16.50 per share.  That bonus will be funded by Heinz owners Brazilian private equity firm, 3G Capital and Warren Buffett's Berkshire Hathaway (BRKA), through a US$10 billion cash injection.

"By bringing together these two iconic companies through this transaction, we are creating a strong platform for both U.S. and international growth," said Heinz chairman and 3G managing partner Alex Behring.

3G and BRKA had teamed up to take control of Heinz in 2013.  Both companies were also behind the merger of Burger King and coffee and doughnut chain Tim Hortons Inc. in 2014. 

Business analysts said Kraft will most likely benefit from the merger, taking advantage of Heinz' global presence. Heinz gets majority of its sales from its market overseas, while Kraft brands rely mainly on North American households.

Kraft CEO John Cahill said the massive merger will allow Kraft to grow faster than he could imagine.  Cahill would sit as Vice-Chairman of the newly formed company.

Both companies disclosed the merger is expected to save about US$1.5 billion in annual costs once it begins operations, until end of 2017.  The savings are a result of combined manufacturing and distribution efforts. 

Kraft has been reportedly suffering from sluggish demand as consumers tend to become more health conscious.  Just last week, Kraft recalled about 6.5 million boxes of macaroni and cheese due to presence of metal pieces.  Observers say cost-cutting is one way for Kraft to make up for lost revenues.

Aside from Kraft brands, other popular packaged food makers have been struggling to cope with the pressure brought by the increasing number of consumers shifting from processed foods to organic brands which are perceived to be healthier.  Experts say the Heinz-Kraft merger is a reflection of that pressure.

Once Kraft undergoes cost-cutting measures as part of the merger, the company may have to let go of some of its employees. However a union representing workers from both Heinz and Kraft said it will closely coordinate with both companies to ensure the merger won't have any negative impact on employment. 

The Heinz-Kraft company will put up headquarters in Pittsburgh and Chicago area, home of Heinz and Kraft.  It is expected to have an annual revenue of about $28 billion.

Tagskraft, Heinz, kraft-heinz, ketchup