The month of November has, in some respects, been a trying one for the Kraft Heinz Company. After announcing the results of the company’s third quarter fiscal 2018, Kraft Heinz was beset by activist investors urging the company to go private—with Krupa Global Investments, one of the company’s largest institutional shareholders calling for a $80 per share buyout.
This Tuesday, November 6, the company announced an agreement to sell its Canadian natural cheese business—including Cracker Barrel, P’tit Quebec and aMOOza! brands—to Parmalat in a transaction valued at $1.62 billion CAD (approximately $1.24 billion USD).
“We’re excited about what this transaction means for our future growth and business in Canada,” said Bernardo Hees, Chief Executive Officer of Kraft Heinz, in a press release. “We also believe Parmalat is uniquely positioned to advance the natural cheese business given their experience and focus on the dairy industry. At the same time, we can focus on the segments and categories where we have stronger brand equity, competitive advantage and greater growth prospects.”
Under the agreement, Kraft Heinz will sell its production facility located in Ingleside, Ontario, and transfer approximately 400 employees from that facility to Parmalat. Kraft Heinz will continue to manufacture other cheese products—including Philadelphia, Cheez Whiz and Kraft Singles, which are processed in Mount Royal, Quebec, where Kraft Heinz Canada employs approximately 900 employees.
The company noted that the proceeds of its sales are expected to be used to primarily pay down debt, with reduced interest expenses expected to offset the majority of EPS dilution on a run-rate basis. The natural cheese business being sold contributed approximately $560 million CAD ($427 million USD) to Kraft Heinz’s net sales in 2017.
Will Kraft Heinz’s efforts to restructure and repay debt pay off? Will they satiate activist investors? Deli Market News will continue to report.