Heinz is going to buy 51% of Kraft in a deal brokered that is by Berkshire-Hathaway and the Brazilian-based private equity company 3G. As a result, Kraft shareholders will get a $10 billion special dividend (about $16.50 a share) under the deal.
1. What happened to the price of Kraft shares after this deal was announced?
2. How does the dividend equate with Kraft’s market value?
3. Based on the information in the article, about how many shares of stock are outstanding for Kraft?
4. Research the following question on the web: What type of budgeting does 3G plan to employ at the newly merged company? Why and how does it work? Do you think it is a good idea?
Source: Smith, G. (2015). Heinz, Kraft agree to merge, forming a new food giant. Fortune, March 25 (Retrievable online at https://fortune.com/2015/03/25/heinz-kraft-to-merge-to-form-new-food-giant/