H.J. Heinz Co. is buying Kraft Foods, creating one of the largest food and beverage companies in the world with annual revenue of about $28 billion, the companies said in a statement.
Heinz, of Pittsburgh, is buying Northfield, Illinois-based Kraft and will own Kraft, Heinz, Oscar Mayer, Ore-Ida and other brands. Eight of those brands have annual sales of $1 billion or more and five others log sales between $500 million and $1 billon every year.
The deal to bring together the two companies, each more than a century old, was engineered by Warren Buffett's Berkshire Hathaway and Brazilian investment firm 3G Capital. The two will invest another $10 billion in the new company.
Kraft Heinz will maintain headquarters in Pittsburgh, where Heinz is based, and also in the Chicago area, where Kraft resides.
Shares of Kraft jumped 26 percent Wednesday before the opening bell.
Kraft shareholders will receive stock in the combined company and a special cash dividend of approximately $10 billion, or $16.50 per share. Each share of Kraft will be converted into one share of Kraft Heinz.
Current Heinz shareholders will own 51 percent of the combined company, with Kraft shareholders owning a 49 percent stake.
Annual cost savings estimated to be $1.5 billion are expected to be booked by the end of 2017.
Buffett and 3G Capital snapped up Heinz in a deal valued at $23.3 billion two years ago.
"This is my kind of transaction," said Buffett in a printed statement. "Uniting two world-class organizations and delivering shareholder value. I'm excited by the opportunities for what this new combined organization will achieve."
Heinz CEO Bernardo Hees will become CEO, Alex Behring, Heinz chairman and managing partner at 3G Capital, will be chairman. Kraft CEO and Chairman John Cahill will become vice chairman.
The deal still needs a nod from federal regulators as well as shareholders of Kraft Foods Group Inc., but the boards of both companies unanimously approved it. The planned closing is set for the second half of the year.
Kraft Heinz plans to keep Kraft's current dividend per share once the transaction closes. Kraft has no plans to change its dividend before the deal is complete.