Kraft to Pay Special Dividend Following Heinz Merger

US company Kraft Foods, who bought out British confectioners Cadbury in 2010, is to merge with beans-manufacturer Heinz in a deal backed in part by Warren Buffett

Erin Lash, CFA 25 March, 2015 | 4:45PM
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Morningstar equity analysts are considering the fair value estimate for narrow-moat Kraft Foods (KRFT), and are likely to take up our valuation by more than 10%, as we digest the details of the company's plans to merge with privately held Heinz. Kraft shareholders are poised to receive a $16.50 per share special dividend, as well as own 49% of the combined firm, with the transaction set to close in the second half of 2015.

Kraft-Heinz would become the third-largest food and beverage firm in North America

We estimate the newly created entity will possess an enterprise value of around $70 billion, as compared with Kraft's $46 billion enterprise value prior to the transaction being inked, and an equity valuation of around $50 billion-$55 billion after accounting for debt and the special dividend.

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About Author

Erin Lash, CFA  Erin Lash, CFA, is a senior stock analyst with Morningstar.

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