Kraft Heinz to divest natural cheese business for $3.2bn

US-based food company Kraft Heinz has entered a definitive agreement with a US affiliate of Groupe Lactalis to divest its natural, grated, cultured and speciality cheese businesses for $3.2bn.

As part of the deal, Kraft Heinz has agreed to sell its cheese businesses in the US, Canada and the entire International Cheese business outside these two countries.

The brands that are part of the deal include Breakstone’s, Knudsen, Polly-O, Athenos, Hoffman’s, Cracker Barrel within and outside US and Cheez Whiz in Canada.

Additionally, Kraft Heinz will sign a perpetual licence agreement with Groupe Lactalis for Kraftin Natural, grated and international cheeses, and Velveeta in shredded and international cheese products.

Kraft Heinz noted that it intends to retain the Philadelphia Cream Cheese, KraftSingles, Velveeta Processed Cheese and Cheez Whiz Processed Cheese businesses in the US and Canada.

The company will also retain, Kraft, Velveeta and Cracker Barrel Mac and Cheese businesses, as well as the Kraft Sauces businesses located worldwide.

Under the agreement, Kraft has agreed to sell its production facilities in Tulare, California; Walton, New York; and Wausau, Wisconsin.

The company has also agreed to divest its distribution centre in Weyauwega, Wisconsin.

Approximately 750 employees working at the facilities will be transferred from Kraft Heinz to Groupe Lactalis.

Kraft Heinz CEO Miguel Patricio said: “We believe these cheese and dairy businesses will thrive in the hands of a global dairy company like Groupe Lactalis.

“At the same time, the transaction will enable us to build a sustainable competitive advantage in businesses where we have stronger brand equity, greater growth prospects and can use our manufacturing scale and consumer-based platforms approach.

Subject to regulatory review as well as approval, the transaction is expected to close in the first half of 2021. Kraft Heinz intends to use the proceeds primarily to reduce debt.

Kraft Heinz has also unveiled its new operating model, which will help in guiding resource allocation and investment decisions.

With its new operating model, Kraft Heinz aims to enhance the company’s strategic focus and create shareholder value.

In July 2019, Parmalat Canada acquired Kraft Heinz’s Canadian natural cheese business for a consideration of C$1.62bn ($1.24bn).