H.J Heinz Company
Internet Mini Case #13
H.J. Heinz Company
Maryanne M. Rouse
H.J. Heinz Company (HNZ) and its subsidiaries manufactured and marketed an extensive line of processed and minimally processed food and related products throughout the world. The company’s products were organized into two core businesses: meal enhancers and meals and snacks. Heinz distributed its products via its own sales force, independent brokers, agents, and distributors to chain, wholesale, cooperative, and independent grocery accounts; mass merchants and superstores; pharmacies; club stores; food service distributors; and institutions, including schools and government agencies.
The Del Monte Merger
IN JUNE 2002, HEINZ ANNOUNCED THAT IT WOULD SPIN OFF AND THEN MERGE ITS SLOWER-SELLING PRODUCTS WITH DEL MONTE FOODS, INC., IN AN EFFORT TO SIMPLIFY ITS BUSINESS. AFTER POSITIVE VOTES BY BOTH HEINZ AND DEL MONTE SHAREHOLDERS AND APPROVAL BY THE IRS, THE TRANSACTION, COMPLETED ON DECEMBER 21, 2002, GAVE HEINZ SHAREHOLDERS APPROXIMATELY 75% OF THE NEW, MUCH LARGER DEL MONTE. THE PRODUCT LINES/SEGMENTS SHIFTED TO DEL MONTE INCLUDED HEINZ’S U.S. AND CANADIAN PET FOOD AND PET SNACKS BUSINESSES; U.S. TUNA; U.S. PRIVATE-LABEL SOUPS AND GRAVIES, AS WELL AS COLLEGE INN SOUPS; AND U.S. INFANT FEEDING. THE AFFECTED BRANDS INCLUDED STARKIST, 9 LIVES, KIBBLES ‘N BITS, NATURE’S GOODNESS BABY FOOD, AND COLLEGE INN SOUPS. THE MERGER WAS EXPECTED TO REDUCE HEINZ’S ANNUAL REVENUE BY APPROXIMATELY 20%, OR $1.8 BILLION, WHILE DOUBLING DEL MONTE’S SIZE.
Under the terms of the merger, Heinz shareholders received 0.45 share of stock in the new Del Monte for every share of Heinz stock owned, while Del Monte assumed approximately $1.1 billion of Heinz’s debt (about 21% of Heinz’s total debt). Heinz also announced that it would reduce its dividend by 33%. (The dividend reduction was expected to free up substantial cash flow, which Heinz planned to use to pay down debt and underwrite additional marketing.) The merger was
H.J. Heinz Company
Maryanne M. Rouse
H.J. Heinz Company (HNZ) and its subsidiaries manufactured and marketed an extensive line of processed and minimally processed food and related products throughout the world. The company’s products were organized into two core businesses: meal enhancers and meals and snacks. Heinz distributed its products via its own sales force, independent brokers, agents, and distributors to chain, wholesale, cooperative, and independent grocery accounts; mass merchants and superstores; pharmacies; club stores; food service distributors; and institutions, including schools and government agencies.
The Del Monte Merger
IN JUNE 2002, HEINZ ANNOUNCED THAT IT WOULD SPIN OFF AND THEN MERGE ITS SLOWER-SELLING PRODUCTS WITH DEL MONTE FOODS, INC., IN AN EFFORT TO SIMPLIFY ITS BUSINESS. AFTER POSITIVE VOTES BY BOTH HEINZ AND DEL MONTE SHAREHOLDERS AND APPROVAL BY THE IRS, THE TRANSACTION, COMPLETED ON DECEMBER 21, 2002, GAVE HEINZ SHAREHOLDERS APPROXIMATELY 75% OF THE NEW, MUCH LARGER DEL MONTE. THE PRODUCT LINES/SEGMENTS SHIFTED TO DEL MONTE INCLUDED HEINZ’S U.S. AND CANADIAN PET FOOD AND PET SNACKS BUSINESSES; U.S. TUNA; U.S. PRIVATE-LABEL SOUPS AND GRAVIES, AS WELL AS COLLEGE INN SOUPS; AND U.S. INFANT FEEDING. THE AFFECTED BRANDS INCLUDED STARKIST, 9 LIVES, KIBBLES ‘N BITS, NATURE’S GOODNESS BABY FOOD, AND COLLEGE INN SOUPS. THE MERGER WAS EXPECTED TO REDUCE HEINZ’S ANNUAL REVENUE BY APPROXIMATELY 20%, OR $1.8 BILLION, WHILE DOUBLING DEL MONTE’S SIZE.
Under the terms of the merger, Heinz shareholders received 0.45 share of stock in the new Del Monte for every share of Heinz stock owned, while Del Monte assumed approximately $1.1 billion of Heinz’s debt (about 21% of Heinz’s total debt). Heinz also announced that it would reduce its dividend by 33%. (The dividend reduction was expected to free up substantial cash flow, which Heinz planned to use to pay down debt and underwrite additional marketing.) The merger was