Filed by: Kraft Foods Group, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company: Kraft Foods Group, Inc.
Commission File No.: 001-35491
The following presentation was given during the investor call hosted by Kraft Foods Group, Inc. and H.J. Heinz Company on March 25, 2015 at 8:30 a.m., and was made available on the Kraft Foods Group, Inc. investor relations website at http://ir.kraftfoodsgroup.com/.
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Investor Presentation
March 25, 2015
Creating a Global Food & Beverage Leader
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Safe Harbor Statement
Forward-Looking Statements
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, 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 proposed 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 expected timing and likelihood of completion of the pending merger, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the pending merger that could reduce anticipated benefits or cause the parties to abandon the transaction, the ability to successfully integrate the businesses, the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement, the possibility that Kraft shareholders may not approve the merger agreement, the risk that the parties may not be able to satisfy the conditions to the proposed transaction in a timely manner or at all, risks related to disruption of management time from ongoing business operations due to the proposed transaction, the risk that any announcements relating to the proposed transaction could have adverse effects on the market price of Krafts common stock, and the risk that the proposed transaction and its announcement 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.
Additional Information and Where to Find It
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. This communication may be deemed to be solicitation material in respect of the proposed transaction between Kraft and Heinz. In c onnection with the proposed transaction, Heinz intends to file a registration statement on Form S-4, containing a proxy statement/prospectus (the S-4) with the Securities and Exchange
Commission (SEC). This communication is not a substitute for the registration statement, definitive proxy statement/prospectus or any other documents that
Heinz or Kraft may file with the SEC or send to shareholders in connection with the proposed transaction. SHAREHOLDERS OF KRAFT ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE PROXY STATEMENT/PROSPECTUS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.
Investors and security holders will be able to obtain copies of the S-4, including the proxy statement/prospectus, and other documents filed with the SEC (when available) free of charge at the SECs website, http://www.sec.gov. Copies of documents filed with the SEC by Kraft will be made available free of charge on Krafts website at http://www.kraftfoodsgroup.com/. Copies of documents filed with the SEC by Heinz will be made available free of charge on Heinzs website at http://www.heinz.com/.
Participants in Solicitation
Kraft and its directors and executive officers, and Heinz and its directors and executive officers, may be deemed to be participants in the solicitation of proxies from the holders of Kraft common stock in respect of the proposed transaction. Information about the directors and executive officers of Kraft is set forth in the proxy statement for Krafts 2015 Annual Meeting of Shareholders, which was filed with the SEC on March 18, 2015. Information about the directors and executive officers of Heinz will be set forth in the S-4. Investors may obtain additional information regarding the interests of such participants by reading the proxy statement/prospectus regarding the proposed transaction when it becomes available. You may obtain free copies of these documents as described in the preceding paragraph.
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List of Participants
John Cahill
Chairman and Chief Executive Officer, Kraft Foods Group
Alexandre Behring
Chairman, H.J. Heinz Company
Co-founder and the Managing Partner, 3G Capital
Bernardo Hees
Chief Executive Officer, H.J. Heinz Company
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A Transformational Combination
[Graphic Appears Here]
#4 North American Food & Beverage Company
Portfolio of iconic North American brands
#1 or #2 position in 17 core categories
98% penetration in North America households
80%+ awareness of Kraft brand in 14 key international markets
$18bn+ in sales
[Graphic Appears Here]
Leading, Global Food Player, with Substantial Geographic Diversity
Portfolio of iconic, global brands
Products with #1 or #2 market share in 50+ countries
$10bn+ in sales
Most profitable food company
[Graphic Appears Here]
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Agenda
Transaction Highlights
Kraft Overview
Heinz Overview
A Transformational Combination
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Creating A Global Powerhouse in Food & Beverage
Substantially Improved Scale in Key North
America Retail and Foodservice Markets
Significant Cost Efficiency and Synergies
Opportunity of $1.5 billion
[Graphic Appears Here]
International Expansion of Kraft Brands
Through Heinz Platform
[Graphic Appears Here]
Anchored by Long-Term Partners
With Proven Track Records
Investment Grade Company with Sustainable
Capital Structure for the Long-Term
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Substantial Value for Kraft Shareholders
Today
Transaction Consideration
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Share 1 Share of $16.50 |
of Kraft Kraft Heinz Cash Payment
Transaction is Expected to be EPS Accretive by 2017
New Company to Maintain Dividend Per Share,
Which is Expected to Increase Over Time
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Key Transaction Highlights
Kraft shareholders to own 49% and Heinz shareholders to own 51% of the combined
entity
Consideration Kraft shareholders to receive a cash payment of $16.50 per share ($10 billion
aggregate value), fully funded by $10 billion of new common equity contributed by
Heinz shareholders
Strongly committed to Investment Grade capital structure for long-term sustainability
Capital Refinance $9.5bn of existing Heinz High-Yield debt with Investment Grade debt at
transaction close
Structure
Call Preferred Equity in 2016 and replace with Investment Grade debt, with $450 -
$500 million in annualized cash savings
Significant synergy potential $1.5 billion in run-rate annual cost savings by 2017
Value Significant revenue synergy opportunity, with strong platform for international growth
Creation Meaningful working capital improvements
Immediate cash payment and EPS accretive by 2017
Dividend Maintain Krafts current dividend per share, which is expected to increase over time
Timing Transaction expected to close during H2 2015
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Key Governance Highlights
Bernardo Hees, Chief Executive Officer of Heinz, will be appointed Chief Executive
Officer of The Kraft Heinz Company
Management
The new executive team for the combined global company will be announced during
the transition period, but no later than transaction closing
Board of Directors of the combined company will consist of five members appointed
by the current Kraft Board, as well as six members appointed by the current Heinz
Board
From Heinz, members of the new Board will be Alex Behring, Warren E. Buffett, Jorge
Paulo Lemann, Marcel Telles, Greg Abel and Tracy Britt Cool
Board of Directors Alex Behring, Chairman of Heinz and the Managing Partner at 3G Capital, will become
Chairman of The Kraft Heinz Company
From Kraft, members of the new Board will be John T. Cahill, John C. Pope, Mackey J.
McDonald, L. Kevin Cox and Jeanne P. Jackson
John Cahill, Kraft Chairman and Chief Executive Officer, will become Vice Chairman and
Chair of a newly formed Operations and Strategy Committee of the Board of Directors
The Kraft Heinz Company will be co-headquartered in Pittsburgh and the Chicago area
Community Committed to supporting local charities and community relationships in the
communities in which it operates
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Our Commitment to an Investment Grade Rating
Strongly Committed to Investment Grade for Long-Term Sustainability
Refinance $9.5 billion of existing secured Heinz High -Yield debt with new
Investment Grade debt at transaction close
Refinance remaining existing secured Heinz High -Yield debt with new
Investment Grade debt as soon as practicable
Capital Structure Refinance $8.0 billion of Preferred Equity as soon as it is callable in June
2016 with new Investment Grade debt
Targeting $2 billion of debt pay-down within two years
Target net leverage of below 3.0x to be achieved in the medium -term
Maintain dividend per share, which is expected to increase over time
Shareholder
Returns No share repurchases for at least two years following transaction close in
order to accelerate deleveraging to our stated target
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Introduction to Krafts New Partners
Overview
Led by Chairman and CEO Warren Buffett, Berkshire
Hathaway is widely recognized for its long history of
successful investments
The firm currently owns and operates a large number
of businesses engaged in a variety of activities
Overview
Global investment firm focused on long-term value, with a particular emphasis on maximizing the potential of brands and businesses The firm and its partners have a strong history of operational excellence, board involvement, deep sector expertise, and an extensive global network
Selected Track Record
Selected Track Record
[Graphic Appears Here]
Kraft Foods is partnering with Heinz shareholders to create a best-in-class global food powerhouse with a deep portfolio of iconic brands
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Agenda
Transaction Highlights
Kraft Overview
Heinz Overview
A Transformational Combination
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Kraft Overview
98% Household Penetration in North
America
#1 or #2 Position in 17 Top Categories
(80% of Sales)
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Brands with Annual Retail Sales Over $1bn |
Products Average >2x the Share of the
Nearest Branded Competitor
[Graphic Appears Here]
80%+ Awareness of the Kraft Brand in 14 Key
International Markets
12 Source: Company filings and Nielsen.
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Unmatched North America Brand Portfolio
Kraft has leading brands across 17 diverse core categories
Selected Kraft Brands Kraft Brand Development
Cheese
(22% of Sales) 98% 10 43 or $107
Refrigerated
Meals
(19% of Sales)
Beverages
(14% of Sales)
Meals &
Desserts
(12% of Sales)
Enhancers &
Snack Nuts
(11% of Sales)% Household # Brands per Purchases of Kraft
Penetration Household Brands per
Canada Household (per
(11% of Sales) Year)
Source: Company filings and Nielsen.
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Note: Foodservice and Exports together comprise 11% of Sales. |
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Leading Player in North American Food & Beverage
Last Fiscal Year North American Food & Beverage Sales ($bn)
$37.2
$27.9 |
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(a) |
$21.5
$17.9
$13.7
$9.5
$6.9 |
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$6.4(b) |
$5.6 |
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$5.5 |
$4.2(b)
$2.4
Source: Company filings and Nielsen.
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Note: North America beverages reflects non-alcoholic beverages. |
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Nestlé sales data reflects 2014 financials converted from CHF to USD at average 2014 exchange rate.
Campbells and McCormick sales data reflect U.S. sales only.
Agenda
Transaction Highlights
Kraft Overview
Heinz Overview
A Transformational Combination
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Heinz Overview
A Powerful, Global Portfolio of Leading
Iconic Brands
Diversified Geographic Footprint with ~60%
of Sales outside of North America
Strong, Profitable Growth in Emerging
Markets (25% of Sales)
Industry-Leading EBITDA Margins with Room
for Expansion
[Graphic Appears Here]
Experienced, Proven Global Leadership Team
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A Powerful, Global Portfolio of Leading Iconic Brands
Ketchup & Sauces Meals & Snacks Infant/Nutrition
#1 U.S. Frozen Food
Developed
Markets #1 U.S. Ketchup #3 U.S. Sauces #1 Italy Wet Baby Food
#1 Global Ketchup
#1 U.K. Baked Beans
Emerging #2 Indonesia Soy Sauce
Markets #1 Brazil Canned Vegetables #3 India Meal Replacement
#3 China Soy Sauce
17 Source: Nielsen and Euromonitor.
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Strong Exposure to Emerging Markets
Geographic Sales Mix
Emerging Market % of Sales
+16pts
25%
North
America
39%
International
61% 9%
2005
2014
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Transformational Changes at Heinz since Acquisition
Announced new leadership team on Day One after transaction
Mix of Heinz top talent and 3G nominees
Realized $1 billion operating improvements(a)
Implemented Zero-Based Budgeting and Management by Objectives
Simplified corporate structure
Sharpened focus on day-to-day operations
Global standard for monthly performance routines
Individual performance targets for 3,500+ employees
Rolled-out Vision & Values globally
Launched People and Culture pillars
Promoted 1,400 top Heinz talent to management
EBITDA Margin
+8pts
26%
18%
Close 2014A
(June 2013)
19 (a) Annualized run-rate basis.
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Simple, Well-Defined Strategy to Drive Organic Growth
INCREASED Reinvesting substantial fixed cost savings back into the business
MARKETING Intention to increase marketing spending to support top -line growth
Goal to be industry leading innovator in the consumer food space
BIG, BOLD BETS Heinz North America and Europe will be innovation platforms
ON
INNOVATION Other zones implementing successful launch while developing local
innovation for custom categories
Revenue management initiatives to drive top -line growth and profitability
PROFITABLE Deep analysis and optimization of promotion activities
GROWTH Brand strength helping to drive premium pricing/positioning
SKU rationalization to focus on profitable growth
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Heinz Focused on Big, Bold Bets
Heinz has already launched a number of Big Bet product innovations in 2015
Product Strategic Objective Consumer Insight
Heinz High satisfaction category
Get existing yellow mustard users to
Yellow Low involvement yellow mustard is
trade-up to Heinz by offering a better
Mustard yellow mustard
tasting, higher quality yellow mustard
(HNA) #1 category driver is taste
Sriracha & Generate new occasions for Millennials looking for flavor varieties
Jalapeño consumption savory / spicy and ethnic flavors are
Ketchup Position strong Ketchup brand in trending
(HNA) growing on-trend segment
Heinz Hot Build on Heinz strength and strong
Sauces position in Sauces offering alternatives
(Europe) in tune with consumer needs
Consumers actively seeking for flavor adventures to be incorporated into their regular meals
Spicier flavors have been outpacing growth trends
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Agenda
Transaction Highlights
Kraft Overview
Heinz Overview
A Transformational Combination
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Creating A Global Powerhouse in Food & Beverage
Substantially Improved Scale in Key North
America Retail and Foodservice Markets
Significant Cost Efficiency and Synergies
Opportunity of $1.5 billion
[Graphic Appears Here]
International Expansion of Kraft Brands
Through Heinz Platform
[Graphic Appears Here]
Anchored by Long-Term Partners
With Proven Track Records
Investment Grade Company with Sustainable
Capital Structure for the Long-Term
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#3 Food & Beverage Player in North America
Combined 2014 sales of $29.1 billion; $22.2 billion in North America
Last Fiscal Year North American Food & Beverage Sales ($bn)
$37.2
$27.9 (a)
$22.2 $21.5
$17.9
$13.7
$9.5
$6.9 $6.4(b) $5.6 $5.5
$4.2(b)
$2.4
Source: Company filings and Nielsen.
24 Note: North America beverages reflects non-alcoholic beverages.
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Nestlé sales data reflects 2014 financials converted from CHF to USD at average 2014 exchange rate.
Campbells and McCormick sales data reflect U.S. sales only.
and the Leading Branded North American Player in Foodservice
Foodservice platform raises brand awareness with iconic portfolio of front -of-store brands
Profitable and steady business that maximizes advantage of scale in North America
Unmatched Scale Ubiquitous, Front-of-Store Brands
2014A Sales ($bn)
$3.1
Kraft
$1.6 |
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$1.6 |
Heinz
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Source: Company filings.
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$1.5bn of Cost Efficiencies and Synergies
Implement Zero-Based Budgeting
COGS Rationalize manufacturing footprints, integrate distribution
Savings networks and realize synergies from overlap
Improve productivity & optimize procurement expenditure
Implement Zero-Based Budgeting
SG&A
Streamline organization and realize synergies from overlap
Savings
Optimize advertising and marketing expenditure
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Unparalleled Portfolio of Leading Brands
Eight billion-dollar brands and five $500m+ brands
$1bn+ Brands $500m $1bn Brands
Selected $100m$500m Brands
27 Source: Nielsen.
Note: Brand sales reflect total retail sales under brand umbrella.
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Clear Opportunities for Revenue Synergies and Increased Organic Growth
Potential Brand Expansion Opportunities
Win additional shelf space with
increased scale
America Combine leading foodservice
platforms to offer customers
North broader range of products and
solutions
Bring Krafts iconic brands to
international markets
Leverage Heinz international
International platform
Targeted approach in accordance
with Mondelēz agreements
[Graphic Appears Here]
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Existing Platform to Enable International Growth
[Graphic Appears Here]
[Graphic Appears Here]
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Potential to Capitalize on Krafts Untapped
International Opportunity Over Time
Repatriation of Kraft brands over time presents meaningful international growth opportunity
Mexico
MiO
Kool Aid
Kraft Cheese
Kraft Processed Cheese
Kraft Mayo
Central America
Kraft Cheese
Kraft Mayonnaise
Kraft Salad Dressing
Kraft Mac & Cheese
Country Time
Kool Aid
Miracle Whip
European Union
Kraft Cheese
Kraft Mac & Cheese
Bulls Eye
Cracker Barrel
Caribbean
Crystal Light
Country Time
Carte Noir
Crystal Light (PR)
Tassimo
South America
Kraft Cheese
Kraft Mayonnaise
Kraft Mac & Cheese
Kool Aid
Kraft Processed Cheese (Venezuela)
Kraft Mayo (Venezuela)
Kraft Mayo
Kraft Salad Dressing
Kraft Ketchup
Lunchables (UK & Ireland)
CEE Non-EU
Kraft Cheese
Kraft Mayonnaise
Miracle Whip
MEA Near East
Kraft Mayonnaise
Miracle Whip
Kraft Cheese
MEA Far East
Kraft Mayonnaise
Miracle Whip
Processed Cheese (Mauritius)
Australia & New Zealand
Kraft Cheese
Kraft Mac & Cheese
Kraft Mayo
Peanut Butter
Salad Dressings
Opportunity to leverage Heinzs existing international infrastructure for expansion
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High Awareness of the Kraft Brand Internationally
The Kraft brand has 80%+ awareness in 14 international countries; Heinz has presence in 13 of these
Awareness of the Kraft Brand(a) Heinz Presence?
U.S. 100% ?
Canada 100% ?
Indonesia 100% ?
U.K. 99% ?
Australia 99% ?
Italy 99% ?
Mexico 98% ?
China 98% ?
Germany 98% ?
U.A.E. 98% ?
Malaysia 98% ?
Spain 96% ?
Argentina 92%
Brazil 89% ?
India 87% ?
Russia 80% ?
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Source: Kraft Global Trust Barometer Study, 2012. Selected countries presented.
(a) |
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Represents Kraft brand awareness with informed consumers in each country. |
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Berkshire Hathaway and 3G Capital are the Right Partners for Kraft
Long-term oriented investors with shared vision and common values
Track record of revitalizing, building, and expanding strong consumer brands
Focused on meaningful operational improvements through deep partner involvement
Stability in shareholder base provides support for implementing transformative changes
[Graphic Appears Here]
Track Record of Shareholder Value Creation
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Q&A