The Kraft Heinz Co. has entered into a definitive agreement to sell its natural, grated, cultured and specialty cheese businesses to a U.S. affiliate of Groupe Lactalis for a purchase price of $3.2 billion USD. The proposed transaction is expected to close in the first half of 2021, subject to regulatory review and approval.
The transaction includes the following brands: Breakstone’s, Knudsen, Polly-O, Athenos, Hoffman’s, Cracker Barrel in the U.S. only, and outside the U.S. and Canada only, Cheez Whiz.
In addition, Kraft Heinz will partner with Groupe Lactalis on a perpetual license for Kraft in natural, grated and international cheeses and Velveeta in shredded and international cheeses.
Kraft Heinz will retain the Philadelphia Cream Cheese, Kraft Singles, Velveeta Processed Cheese and Cheez Whiz processed cheese businesses in the U.S. and Canada, the Kraft, Velveeta and Cracker Barrel Mac & Cheese businesses worldwide and the Kraft Sauces business worldwide.
“We believe these cheese and dairy businesses will thrive in the hands of a global dairy company like Groupe Lactalis,” said Kraft Heinz CEO Miguel Patricio. “At the same time, the transaction will enable us to build sustainable competitive advantage in businesses where we have stronger brand equity, greater growth prospects and can use our manufacturing scale and consumer-based platforms approach. This is a great example of agile portfolio management at work.”
As outlined in the new Kraft Heinz operating model, platform roles will help guide resource allocation and investment decisions. Kraft Heinz will focus on growth areas and take strategic action where appropriate. This will help to accrete the company’s growth profile, enhance strategic focus and create shareholder value.
Under the terms of the agreement, Kraft Heinz will sell production facilities located in Tulare, California; Walton, New York; and Wausau, Wisconsin, and a distribution center in Weyauwega, Wisconsin. These facilities and their employees will continue to operate in ordinary course. Approximately 750 employees will be transferred from Kraft Heinz to Groupe Lactalis.
The cheese businesses being sold contributed approximately $1.8 billion USD to Kraft Heinz’s net sales for the 12 months ended June 27. The transaction valuation represents an approximate 12x multiple of LTM Adjusted EBITDA(1) for the standalone business. Kraft Heinz expects to use post-tax transaction proceeds primarily to pay down debt.
RBC Capital Markets LLC served as exclusive financial advisor to Chicago-based Kraft Heinz for this transaction, while Paul, Weiss, Rifkind, Wharton & Garrison LLP served as their legal advisors.
Groupe Lactalis is a French family business founded in 1933 in Laval, France. Present in 51 countries, with 266 dairies and cheese dairies throughout the world, its 85,000 employees promote milk in all its forms: cheese, drinking milk, yogurts, butters and creams, dairy ingredients and nutrition. Groupe Lactalis offers products from brands such as Président, Galbani and Parmalat and is committed to perpetuating its dairy know-how as the world’s leading player in Protected Designation of Origin (PDO) cheeses.
