The Kraft Heinz Company has revealed its detailed plan to split up its current business into two standalone companies, aimed at maximising capabilities and reducing complexity.
According to the plan, which has been approved by the board, the separation into two independent, publicly traded companies will be done through a tax-free spin-off.
The first entity will be Global Taste Elevation Co, which specialises in spices and shelf-stable meals with approximately US$15.4 billion in net sales and $4 billion in adjusted EBITDA last year. Its brand portfolio includes Heinz, Philadelphia and Kraft Mac & Cheese among others, with 75 per cent of sales coming from sauces, spreads and seasonings.
The second company will be North American Grocery Co, which boasts net sales of $10.4 billion and EBITDA of $2.3 billion. The firm will own brands such as Oscar Mayer, Kraft Singles and Lunchables.
The breakup is expected to provide the two new companies with more strategic and operational focus, enabling them to dedicate the right level of resources, reduce operational complexity, and customise capital allocation based on respective strategies.
“Kraft Heinz’s brands are iconic and beloved, but the complexity of our current structure makes it challenging to allocate capital effectively, prioritise initiatives and drive scale in our most promising areas,” said Miguel Patricio, executive chair of the board for Kraft Heinz.
“By separating into two companies, we can allocate the right level of attention and resources to unlock the potential of each brand to drive better performance and the creation of long-term shareholder value.”
Carlos Abrams-Rivera will continue to lead Kraft Heinz during the separation and will become CEO of North American Grocery Co upon completion of the process.
The board has been working with a global executive search firm to identify potential CEO candidates for Global Taste Elevation Co. Kraft Heinz has no plans to change its current headquarters locations.
The board has also formed a Separation Committee led by vice-chair John Cahill to oversee the execution of the spin-off.
Kraft Heinz expects the split-up to close in the second half of next year. It anticipates up to $300 million of dis-synergies, with clear opportunities to mitigate a substantial portion of these in the near term.
