After getting a cool reception to its proposed merger with Unilever, Kraft decided to abandon its plans to buy the company for $50 per share. In a joint press release the two companies said the agreement to abandon talks was “amicable” and that Kraft Heinz has “the utmost respect” for Unilever.
Kraft Heinz is controlled by the Brazilian private equity group 3G, which has a reputation for bold deals in the consumer products space that receive financial justification from cost rationalization follow the transaction. 3G’s transactions are often backed by Berkshire Hathaway, which owns more than a quarter of Kraft Heinz.
Although 3G was not able to close in on Unilever it was able to make a smaller transaction through another company it controls, Restaurant Brands International, which this morning announced it was buying Popeye’s Louisiana Kitchen for $1.8 billion. Restaurant Brands International has its origin in 3G’s 2010 takeover of Burger King for $3.3 billion. After acquiring the company, 3G re-franchised numerous locations and changed Burger King’s marketing strategy before ultimately taking Burger King public once again and acquiring Tim Horton’s for $12.5 billion in 2014. 3G continues to own about 43% of Restuarant Brands.
Popeye’s approximately 2,600 locations and $3 billion in system-wide sales compares to almost 16,000 and $18 billion for Burger King and 4,500 and $6.5 billion for Tim Horton’s. Because much of that revenue is shared with franchise owners, the company books far less revenue than the total sales throughout their entire system – those amounts are $1.1 billion for Burger King, $3 billion for Tim Horton’s, and $260 million for Popeye’s.
The transaction is expected to close by April.
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