The Kraft Heinz Company Announces Successful Completion of the

Merger between Kraft Foods Group and H.J. Heinz Holding

Corporation

About The Kraft Heinz Company

H.J. Heinz Company, offering "Good Food Every Day,"™ is one of the world's leading marketers
and producers of healthy, convenient and affordable foods specializing in ketchup, sauces, meals,
soups, snacks and infant nutrition. Heinz provides superior quality, taste and nutrition for all eating
occasions whether in the home, restaurants, the office or "on-the-go." Heinz is a global family of
leading branded products, including Heinz® Ketchup, sauces, soups, beans, pasta and infant foods
(representing over one third of Heinz's total sales), Ore-Ida® potato products, Weight Watchers®
Smart Ones® entrées, T.G.I. Friday's® snacks, and Plasmon infant nutrition. Heinz is famous for its
iconic brands on six continents, showcased by Heinz® Ketchup, The World's Favorite Ketchup®.
Kraft Foods Group, Inc. (NASDAQ: KRFT) is one of North America's largest consumer packaged
food and beverage companies, with annual revenues of more than $18 billion. The company's iconic
brands include Kraft, Capri Sun, Jell-O, Kool-Aid, Lunchables, Maxwell House, Oscar
Mayer, Philadelphia, Planters and Velveeta. Kraft's 22,000 employees in the U.S. and Canada have a
passion for making the foods and beverages people love. Kraft is a member of the Standard &
Poor's 500 and the NASDAQ-100 indices.
Investment firms, 3G capital and Berkshire Hathaway, have teamed up to create a new company
through the merger of H.J. Heinz Co. and The Kraft Foods Group. The Kraft Heinz
Company (NASDAQ: KHC) is an American food company formed by the merger of Kraft
Foods and Heinz based in Chicago, Illinoisand Pittsburgh, Pennsylvania. Kraft Heinz is the third-
largest food and beverage company in North America and the fifth-largest in the world with $26.2
billion in annual sales as of 2017. With over 25 brands including Kraft, Heinz, Planters, Grey
Poupon, Oscar Mayerand more, eight have total individual sales of over $1 billion.
A globally trusted producer of delicious foods, The Kraft Heinz Company provides high quality, great
taste and nutrition for all eating occasions whether at home, in restaurants or on the go. The
Company’s iconic brands include Kraft, Heinz, ABC, Capri Sun, Classico, Jell-O, Kool-Aid,
Lunchables, Maxwell House, Ore-Ida, Oscar Mayer, Philadelphia, Planters, Plasmon, Quero, Weight
Watchers Smart Ones and Velveeta. The Kraft Heinz Company is dedicated to the sustainable health
of our people, our planet and our Company.
In 2018, Kraft Heinz launched Springboard Brands, a business focused on growing organic, natural,
and "super-premium" food brands. Kraft Heinz ranked No. 114 in the 2018 Fortune 500 list of the
largest United States corporations by total revenue.

The Merger
The merger was agreed by the boards of both companies, with approval by shareholders (at the
shareholders meeting) and regulatory authorities. The new company became the world's fifth-largest
food and beverage company and the third-largest in the United States. The company is headquartered
in Chicago at the Aon Center and Pittsburgh at PPG Place. Also as previously announced, Bernardo
Hees is Chief Executive Officer of The Kraft Heinz Company. The rest of the Kraft Heinz Company
senior leadership team was announced on June 29, 2015. The companies completed the merger on
July 2, 2015.

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Effective as of the close of trading today, July 2, 2015, Kraft Foods Group, Inc. common shares will
cease trading on the NASDAQ. The Kraft Heinz Company common shares will begin trading on the
NASDAQ under the trading symbol KHC on Monday, July 6, 2015.
On July 31, 2015, The Kraft Heinz Company will pay a cash dividend of $0.55 per share to all
stockholders of record at the close of business on July 27, 2015. This dividend will be in lieu of the
dividend declared on June 22, 2015, by Kraft to its shareholders of record as of July 27, 2015, the
payment of which was conditional on the merger not having closed by that date.

The Company’s immediate focus is on integrating the two businesses and establishing a new
organizational structure, while delivering its financial objectives for 2015.

The Kraft Heinz Company remains committed to its hometowns with co-headquarters in Pittsburgh
and the Chicago area. The Heinz brand and business will remain headquartered in Pittsburgh and the
Kraft brand and business will remain headquartered in the Chicago area.
Under the merger, Kraft's shareholders received 49% of shares in the combined company, plus a one-
time dividend of US$16.50 per share. Fortune reported that sluggish growth for Kraft in the US
market is due to consumers turning to natural and organic ingredients.
Alex Behring, 3G Capital's managing partner, is the chairman of the new company; Bernardo Hees,
also a partner of 3G Capital and Heinz's chief executive officer (CEO), is the CEO of the new
company; and John Cahill, Kraft's CEO, is the vice chairman of the new company. The merger did not
affect the naming rights to Heinz Field, home of the Pittsburgh Steelers.
On February 17, 2017, it was reported that Kraft Heinz Co. had made a $143 billion approach to take
over the British-Dutch multinational Unilever, a significantly larger competitor with 126,000 more
employees and £24bn larger revenue than Kraft Heinz. Unilever declined the initial proposal. The
takeover was subsequently abandoned on 19 February soon after UK Prime Minister Theresa
May had ordered a scrutiny of the deal.

Deal Term
The companies didn’t disclose a value for the deal, but based on Kraft’s market capitalization
following the announcement, investors pegged it around $49 billion. The combined company, which

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will be called the Kraft Heinz Co., will have revenue of about $28 billion and include well-known
brands such as Oscar Mayer meats, Maxwell House coffee, Jell-O, and Planters nuts, along with the
namesake Kraft cheese products and Heinz ketchup and condiments.

The Wall Street Journal late Tuesday was first to report that Kraft Foods Group Inc. and H.J.
Heinz Co., were in merger talks. Shares of Kraftsurged 36% Wednesday to $83.17, its highest close—
by more than 20%--since the company split in 2012. The deal comes as Kraft and other major U.S.
food makers struggle with changes in consumer tastes that have hampered their ability to sell
packaged, processed food.

Heinz shareholders will hold a 51% stake in the combined company, while Kraft shareholders will
hold a 49% ownership stake. Kraftshareholders also will receive a special dividend of $16.50 a share,
representing 27% of Kraft’s closing price on Tuesday. Mr. Buffett’s Berkshire Hathaway Inc. and 3G
Capital will provide the $10 billion to fund the special dividend.

In 2013, 3G teamed up with Mr. Buffett to buy U.S. ketchup maker Heinz for $23 billion. 3G, an
acquisitive Brazilian firm known for buying consumer companies it considers bloated and
aggressively slashing costs, has been looking for targets after it recently raised some $5 billion for
deal making. Annual cost savings from the Kraft and Heinz combination could reach $1.5 billion by
the end of 2017, the companies said Wednesday.

3G has become a major player in the U.S. food sector. Billionaire co-founder Jorge Paulo Lemann
was a big shareholder in brewer InBevand helped engineer its 2008 acquisition of Anheuser-Busch.
In 2010, 3G took private fast-food restaurant Burger King Worldwide Inc. Last year, 3G bought
Canada’s coffee-and-doughnut retailerTim Hortons Inc. through its Burger King holding. The $11
billion deal was financed in part by Mr. Buffett.

The new company’s shares would trade publicly, according to a statement announcing the
deal. Berkshire and 3G also indicated they don’t intend to sell their stakes in the new company any
time soon, saying they “are committed to long-term ownership of the Kraft Heinz company.” Mr.
Buffett said on CNBC that Berkshire would own about 320 million shares in the new company. He
added that the deal had been in the works for about four weeks. On whether the deal’s structure is
attractive enough for Kraft shareholders, Mr. Buffett said, “So far it looks like they like it, and if they
don’t like it, they can probably sell it for a lot more than perhaps Kraft could have been sold to
anybody else.”

Alex Behring, chairman of Heinz and managing partner at 3G Capital, will become the chairman
of Kraft Heinz, and Bernardo Hees, chief executive of Heinz, will be the CEO. John
Cahill, Kraft chairman and CEO, will become vice chairman, and the board of directors will consist of
five members appointed by the current Kraft board, as well as the current Heinzboard, including three
members each from Berkshire and 3G Capital.
Kraft Heinz would rank as the fifth-largest food company in the world, behind Nestlé SA,Mondelez
Internationa l Inc., PepsiCo Inc. and Unilever Group , according to Euromonitor International Inc.
Today’s Kraft was born in a huge corporate split in 2012, when it was spun off by its namesake,
leaving an international snacks company now called Mondelez International Inc.
Kraft has touted its leaner cost structure compared with other packaged food companies, having cut
jobs and eliminated other costs. But it is still highly vulnerable to the changes in consumer tastes.

MARKET TALK
Kraft Deal is Year’s Largest. 3G’s deal to buy Kraft through its Heinz holding marks the year’s
largest deal to date globally, according to Dealogic. Putting the value at $36.6B, it easily exceeds
Cheung Kong’s $23.6 billion reorganization with affiliate Hutchison Whampoa. AbbVie’s pending
$21 billion purchase of Pharmacyclics is now third. The Kraft deal also shows that last’s year’s pace
of deal-making is not abating.

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3G Can Still Find Fat Where Trian Has Forced Diets. The activists at Trian pride themselves on cost-
cutting and running their companies efficiently. But with Kraft, 3G Capital looks likely for the second
time to come in and slash where Trian has already been. Trian has talked up costs reductions
at Kraftafter it split with Mondelez, highlighting it as an example of why companies do well breaking
up. Meanwhile, in 2013, 3G bought Heinz, where Trian had been on the board since 2006. In its fight
with DuPont, Trian has espoused the costs being cut by 3G at Heinz. The ability of 3G, compared
with Trian, partly highlights the difference between someone getting full control and an activist with a
minority on a board.

With products including its bright orange macaroni and cheese, Lunchables, Oscar Mayer deli meats
and Cool Whip dessert topping, Krafthas struggled of late, buffeted by changes in consumer tastes and
other factors that have challenged many of the biggest and most established packaged-food
companies. Its revenue last year was effectively flat at $18 billion, while net profit fell 62% to $1
billion, in part because of higher commodity costs and big charges related to post-employment benefit
plans. The company has said it lost market share in 40% of its U.S. businesses and was flat in the rest.
As people shift to buying fresher foods they perceive as healthier, Kraft has attempted to adapt by
taking artificial coloring out of some of its cheeses. It also has trumpeted a high-protein snack pack
called P3—which combines meat, cheese cubes, and nuts—sold by its Oscar Mayer brand.

Another recent effort stirred controversy: Kraft struck a deal to put the Academy of Nutrition and
Dietetics’ “Kids Eat Right” logo on its single-sliced American cheeses products, prompting ridicule
from Comedy Central host Jon Stewart and criticism from members of the health-professionals group
who said it shouldn’t have seemed to endorse the product.
Kraft has made headway revitalizing some older brands like Planters and Jell-O, but its efforts so far
haven’t sparked a turnaround in sales and profits.

The deal is noteworthy in terms of who helped put it together. There was only one financial adviser
for each company, neither a bulge-bracket Wall Street bank.
Lazard was Heinz’s exclusive financial adviser, while Cravath, Swaine & Moore and Kirkland & Ellis
were its legal advisers. Centerview Partners LLC was Kraft’s exclusive financial adviser, while
Sullivan & Cromwell was its legal adviser.

Motivation and Incentive

Although both companies have widely recognized brand name products, they have suffered from
stagnating or even decreasing demand in the USA. As customers have become aware of the artificial,
fattening or sugary characteristics of the groups’ products, they have turned towards more natural and
healthier products. In this context, why merge two slowing middleweight players? Warren Buffet and
3G Capital are counting on Heinz’s international distribution network to develop Kraft’s international
sales. While Heinz sells more than 60 per cent of its products outside of North America with 650 [4
million bottles of Heinz Ketchup being sold across140 countries every year, Kraft only distributes its
products in the USA. In addition, the two groups have different products and act in different market
segments. For example, Kraft’s main markets are meals, convenience foods, desserts and cheeses.
For Heinz, Ketchup and other sauces represent almost 10 per cent of turnover. The complementary
nature of the two groups’ products limits the risk of in-house competition. By combining their brand
portfolios, the new group will also have better bargaining power with suppliers and therefore improve
profitability. Warren Buffet and 3G Capital have forecasted 1.5 billion dollars in savings by 2017
owing to lower supply costs, an optimized distribution network and greater power to negotiate.

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Event Analysis

According to the terms of the deal, the current shareholders of Heinz will hold a 51% stake in the
newly formed company. These shareholders include 3G Capital and Berkshire Hathaway. The
remainder will go to the current shareholders of Kraft. To sweeten the deal for Kraft’s shareholders,
they have been provided a one-time cash dividend of $16.50 per share. The cost of this dividend,
which amounts to $10 billion, will be borne by 3G Capital and Berkshire Hathaway. This will be paid
out as soon as the deal is finalized. The amount of this dividend is more than a quarter of the closing
share price of Kraft on March 24. Each share of the Kraft Foods Group will entitle the shareholder to
one share of the new entity. The shareholders will however have to be more patient to enjoy the full
benefits of any improvement in operations of the combined entity, since the transaction is expected to
be EPS accretive only by 2017. The agreement to form a new company was unanimously approved by
both the companies’ board of directors. The deal has been valued at around $45 billion. The combined
company will have annual sales revenue of approximately $28 billion.

The new company will have at its helm leaders drawn from the two merging entities. The chairman of
Heinz, Alex Behring, will assume chairmanship of the new company. The vice chairmanship will be
reserved for Kraft’s current chairman and CEO, John Cahill. Bernardo Hees, the CEO of Heinz, will
retain his title as the two companies merge into a single firm.

SYNERGIES EXPECTED
International Growth and Economies Of Scale

There are various ways in which the management hopes to leverage the synergies that the
combination of these two large food companies should provide. Heinz has a global footprint. It
derives 60% of its sales from regions other than North America. Emerging economies contribute 25%
of its sales. Kraft, on the other hand, derives 98% of its sales from North America. This provides
scope for the combined entity to sell Kraft’s brands in international markets. However, that
opportunity set would be limited by Kraft’s agreement with Mondelez International, which was spun
off from Kraft’s namesake parent company in 2012 to focus on international growth. During the spin-
off, Mondelez acquired the rights to sell many of their shared brands in international markets. Going
by Kraft’s presentation on the deal, some iconic brands that don’t fall under this purview are A.1.,
Velveeta, Planters, MiO and Lunchables. The sales of such brands outside North America could
provide a boost to the new firm’s revenue growth.

The management of the two companies have also announced that they expect to realize $1.5 billion in
annual cost savings by the end of 2017, as a result of this deal. The cost synergies will mostly come
from higher economies of scale in the North American market. Having larger volume of sales will
help the company drive better bargains with clients such as large retail outlets and specialty food
stores and restaurants. This will improve operating margins of the company and also give it an
advantage in getting more shelf space in retail outlets. Some part of the cost savings will also come
from the ability of the combined company to refinance Heinz’s high-yielding debt. Since Kraft has a
much better credit rating, the combined entity will be able to replace such debt with low-yielding,
investment-grade debt. Additionally, Heinz’s preferred stocks that become callable in June 2016 will
also be replaced with such debt. This will help reduce the total cost of capital for the combined
company.

In addition, changes to the operations strategy can also contribute to cost savings. These could be
targeted at reducing headcount, shutting down less efficient manufacturing facilities and
implementing zero-based budgeting. Zero-based budgeting means that the managers have to explain
every forecast expense for the year from scratch, without appealing to previous years’ trends. This
helps the top management enforce a more stringent form of cost control and realize cost savings.

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Since the chairman-CEO team at the new company will be the same as that which implemented
drastic cost cutting measures at Heinz, including a reduction in force of 4%, closing several factories
and grounding corporate jets, there is reason to believe that the projected changes to the combined
company’s operations strategy would be successfully implemented.

CONCLUSION & JUDGEMENT

Except for the historical information contained herein, certain of the matters discussed in this
communication constitute “forward-looking statements” within the meaning of the Securities Act of
1933 and the Securities Exchange Act of 1934, both as amended by the Private Securities Litigation
Reform Act of 1995. Words such as “may,” “might,” “will,” “should,” “could,” “anticipate,”

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“estimate,” “expect,” “predict,” “project,” “future”, “potential,” “intend,” “seek to,” “plan,” “assume,”
“believe,” “target,” “forecast,” “goal,” “objective,” “continue” or the negative of such terms or other
variations thereof and words and terms of similar substance used in connection with any discussion of
future plans, actions, or events identify forward-looking statements.

These forward-looking statements include, but are not limited to, statements regarding benefits of the
merger, integration plans and expected synergies, anticipated future financial and operating
performance and results, including estimates for growth. There are a number of risks and uncertainties
that could cause actual results to differ materially from the forward-looking statements included in
this communication.

For example, the ability to successfully integrate the businesses of Kraft and Heinz, risks related to
disruption of management time from ongoing business operations due to the transaction and the risk
that the merger could have an adverse effect on the ability of Kraft and Heinz to retain customers and
retain and hire key personnel and maintain relationships with their suppliers and customers and on
their operating results and businesses generally, problems may arise in successfully integrating the
businesses of the companies, which may result in the combined company not operating as effectively
and efficiently as expected, the combined company may be unable to achieve cost-cutting synergies or
it may take longer than expected to achieve those synergies, and other factors. All such factors are
difficult to predict and are beyond our control. We disclaim and do not undertake any obligation to
update or revise any forward-looking statement in this report, except as required by applicable law or
regulation.

While we may question the new group’s ability to grow, its portfolio of well-recognized brands will
certainly allow HKC to better negotiate deals with distribution networks and even penetrate new
markets. According to Crédit Suisse, Heinz’s net working capital in June 2013 was evaluated at 12
per cent of sales (when 3G Capital acquired Heinz). By the end of 2014, it only represented 3.5 per
cent of revenue. The group managed to push back supplier payments while collecting customer
payments sooner. Crédit Suisse notes that if the same practices are implemented with HKC, this
should generate 650 million dollars in additional operating cash flow. However, it is still a work in
progress. The group also needs to lower its debt. Berkshire and 3G Capital are aiming to reduce the
group’s debt by two billion dollars over the next two years which would allow it to restructure its
balance sheet and reduce its financing costs.

In the mean time,share holders appear to expect substantial value creation,yet whether the business
will be worth almost 100 billion dollars is still to be determined. On January 29 2016, HKC shares
traded at US$78.06 (7 per cent higher than its initial share value). However, on February 18, 2016,
share prices decreased to US$73.45 (only 0.7 per cent above their initial listing price). It remains to be
seen if the Berkshire Hathaway – 3G Capital partnership will continue and manage to achieve their
predicted 1.5 billion dollars in cost reduction by the end of 2017. Such predictions should be taken
with a grain of salt, given the fact that even though Heinz has improved its profitability, it is not yet
on a path towards growth. In addition, it is worth asking whether or not customer demands for
healthier products will permit Kraft to develop its sales, in particular outside of the USA. In any case,
cost reduction will not be sufficient. The new group will have to invest part of its savings in
innovation to invent or reinvent future iconic products and brands.

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The relation articles :
a. https://triblive.com/business/headlines/8651969-74/kraft-heinz-share
b. https://www.refrigeratedfrozenfood.com/articles/89222-kraft-hj-heinz-
merge-to-create-the-kraft-heinz-co
c. https://www.forbes.com/sites/greatspeculations/2015/03/30/analysis-of-
the-kraft-heinz-merger/#6bab3cecc9a8
d. https://www.wsj.com/articles/kraft-foods-h-j-heinz-to-merge-1427278332
e. http://ir.kraftheinzcompany.com/corporate-governance
f. https://news.kraftheinzcompany.com/press-release/finance/kraft-heinz-
company-announces-successful-completion-merger-between-kraft-foods