Kraft Heinz Co (NASDAQ:KHC, ETR:KHNZ) shares fell almost 7% on Tuesday after it announced plans to divide into two separate, publicly traded companies, marking a reversal of the 2015 merger that created the current food conglomerate.
The separation, expected to be completed in the second half of 2026, comes after years of challenges for Kraft Heinz, including declining sales and changing consumer preferences toward healthier and more affordable options.
The first company, tentatively named Global Taste Elevation, will focus on faster-growing, shelf-stable products such as Heinz sauces, Philadelphia cream cheese, and Kraft Mac & Cheese.
It is projected to generate approximately $15.4 billion in sales for 2024, with an adjusted EBITDA of roughly $4 billion. About 75% of its revenue will come from sauces, spreads, and seasonings, and roughly 20% of sales are expected from emerging markets and away-from-home channels.
The second company, North American Grocery, will focus on grocery staples including Oscar Mayer hot dogs, Kraft Singles, and Lunchables.
Sales for 2024 are expected to reach $10.4 billion, with an adjusted EBITDA of $2.3 billion. Around 75% of its sales are from brands ranked #1 or #2 in their categories.
Kraft Heinz said the split will allow each business to concentrate on its distinct strategic priorities, streamline operations, and allocate capital more effectively.
The companies are expected to maintain the current dividend level and pursue investment-grade capital structures.
The separation is intended to be tax-free for Kraft Heinz and its shareholders. The company anticipates up to $300 million in dis-synergies but expects to mitigate a substantial portion of these in the near term.
“This move will unleash the power of our brands and unlock the potential of our business,” Kraft Heinz CEO Carlos Abrams-Rivera said in a statement.
“This next step in our transformation is only possible because of the commitment of our 36,000 talented employees who deliver quality and value for consumers every day.”