Kraft Heinz sells off Canadian cheese business to Parmalat for US$1.23bn

05 Jul 2019 --- The Kraft Heinz Company has entered into a definitive agreement to sell its Canadian natural cheese business to Parmalat for a purchase price of C$1.62 billion (US$1.23 billion). The agreement includes the sale of natural cheese brands Cracker Barrel, P’tit Quebec and aMOOza! in the Canadian market. The proposed transaction is expected to close in the first half of this year, subject to regulatory review and approval.

The sale follows a reportedly difficult year at Kraft Heinz. The company – which is trying to expand into new categories – wrote down the value of the Kraft and Oscar Mayer brands by US$15 billion, posted a US$12.6 billion loss and reduced its dividend by 36 percent in February. At the time, the company also revealed it had received a subpoena from the US securities and exchange commission and cut its dividend by a third.

Under the terms of the agreement, Kraft Heinz will sell its production facility located in Ingleside, Ontario. Kraft Heinz Canada will also transfer approximately 400 employees from that facility to Parmalat.

“We’re excited about what this transaction means for our future growth and business in Canada,” says Bernardo Hees, Kraft Heinz CEO. “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.”

Kraft Heinz will continue to own and market its other cheese products, including Philadelphia, Cheez Whiz and Kraft Singles, which are processed in Mount Royal, Quebec, where Kraft Heinz Canada employs approximately 900 workers. The Kraft Heinz Company remains steadfast in its commitment to the Canadian market, illustrated by its recent acquisition of the Vancouver-based Ethical Bean coffee brand. Across Canada, Kraft Heinz currently employs approximately 2,000 employees in its facilities and thousands more, indirectly, through its co-manufacturers, it notes.

The natural cheese business being sold contributed approximately C$560 million (US$427 million) to Kraft Heinz’s net sales in 2017. Kraft Heinz expects to use transaction proceeds primarily to pay down debt, with reduced interest expenses expected to offset the majority of EPS dilution on a run-rate basis.

By Benjamin Ferrer