Kraft Foods (KRFT) Stock Soars Today on H.J. Heinz Merger Deal

NEW YORK (TheStreet) -- Shares of Kraft Foods Group (KRFT) are up 33.84% to $82.08 in pre-market trading today after the company agreed to merge with H.J. Heinz Co. in a deal structured by Berkshire Hathaway (BRK.B) - Get Report and 3G Capital that will create the third largest food and beverage company in North America and the fifth largest in the world.

The combined company, to be named The Kraft Heinz Company, is expected to have revenue of approximately $28 billion with eight $1 billion brands and five brands between $500 million and $1 billion.

The merger is a stock and cash transaction, with Kraft shareholders slated to receive a special cash dividend of $16.50 per share upon closing, and stock in the combined company representing a 49% stake in the new enterprise.

Berkshire Hathaway and 3G Capital will invest an additional $10 billion in The Kraft Heinz Company and existing Heinz shareholders will collectively own 51% of the new company.

The new company sees "significant" synergy opportunities with a strong platform for organic growth in North America, as well as global expansion, by combining Kraft's brands with Heinz's international presence.

The company plans to maintain Kraft's current dividend per share, which is expected to increase over time.

In 2013, 3G teamed up with Berkshire Hathaway to buy Heinz for about $23 billion.

Insight from TheStreet's Research Team:

The Street's Jim Cramer, Portfolio Manager of the Action Alerts PLUS Charitable Trust Portfolio, wrote this in Realmoney.com after the merger announcement:

Like everyone else who didn't own Kraft (KRFT) last night, I kicked myself for missing it. Let's see; three-and-a-half percent yield, down for the year, household brands, lower input costs across the board in the second half of the year.

How could you not like that? Especially considering that they make Cheese Whiz, the favored ingredient of cheese steaks everywhere, which I am told, by the way, actually has a real smidgen of cheese in it?

Yet, therein lays the rub. The fact that I could make a joke about whether Cheese Whiz has any real cheese in it is why I haven't liked this stock for anything but a takeover play in the years since it was created. The fact that before I wrote this I Googled to see if Cheese Whiz actually had any real cheese in it and found an actual and I am sure well-worn entry posing that exact question -- the answer is it has some but not as much as it used to -- tell you more about why I didn't own it than anything else.

Kraft, you see, is the antithesis of some of the most major trends influencing all of business worldwide. Whether it be Cheese Whiz or Oscar Mayer or Kraft salad dressing or Macaroni and Cheese or Velveeta or Lunchables, this company is definitively on the wrong side of food history, perhaps even on a worse side than its putative acquirer, Heinz.

Think about it. Right now, one of the larger positions we have for ActionAlertsPlus.com is WhiteWave (WWAV) . Why? Because unlike, say Crystal Light or Kool-Aid, two Kraft stalwarts, WhiteWave makes plant-based beverages like soy milk and almond milk and walnut milk, all of which are much better for you than those processed drinks. Right now, WhiteWave is expanding its reach by using its natural and organic "Horizon" imprint to attack Lunchables directly with a more wholesome offering that mimics that of the food processor.

Plus, with WhiteWave you get Earthbound -- something actually green, thrown in. I think that Soylent is closer to green than anything Kraft makes, certainly Velveeta, a deeply suspicious product simply because, does it ever need to be refrigerated say, like, a real milk product? I have always thought it was the food to have in the fallout shelter in the rare case thermonuclear war really does break out.

Of course, the real reason why you wanted to avoid Kraft is that it is a pantry name in an era where the millennials are de-pantrying and going for anything that is perceived as being healthier, and the stock professionals are wise to this. They know what grows -- WhiteWave-and what doesn't -- Kraft. They know that WhiteWave has roared from $17.50 two years ago to $42 now, while Kraft has gone from $47 to $61 during that period.

And that's how I don't spend the whole day kicking myself. If you believe in Kraft the whole way through, not only did you underperform but you also probably missed a ton of other giant moves, think Chipotle  (CMG) - Get Report vs. McDonald's (MCD) - Get Report.

Therefore, you must ask, was it all worth it for this pay day? The answer? Only if some other company, equally challenged by the farm-to-table movement, like Heinz, would make it worth your while. And even then you would have underperformed for years while you waited for something nearly as good as what happened to WhiteWave to happen to you.

-Jim Cramer, 'Why I Didn't Own Kraft' Originally Published on 3/25/2015 on Realmoney.com.

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Separately, TheStreet Ratings team rates KRAFT FOODS GROUP INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate KRAFT FOODS GROUP INC (KRFT) a HOLD. The primary factors that have impacted our rating are mixed,  some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and premium valuation." You can view the full analysis from the report here: KRFT Ratings Report