The Supply Side briefs: Kraft Heinz refinances debt, Kellogg exec to retire, Cargill sells condiment business

by Kim Souza ([email protected]) 247 views 

Food conglomerate  Kraft Heinz expects to achieve at least $1.5 million in annual cost cuts, reduce debt by $2 billion over the next 18 months and realize major working capital savings which prompted Moody’s Investor Services to recently raise the company’s credit ratings as it seeks to refinance some of its debt at a lower interest rate.

Moody’s gave Kraft Heinz a stable outlook and issued a Baa3 rating on $5 billion of senior unsecured notes that Kraft Heinz is offering. The proceeds will primarily be used to call a portion of the company’s $8 billion 9% preferred stock which has a call date of June 6.

Moody’s describes Baa ratings as “medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics.” The redemption of the high coupon preferred stock will generate $450 million to $500 million in yearly savings, the ratings agency said.

Kraft Heinz was formed in July 2015 through the merger of Kraft Foods Group into The H.J. Heinz Co. The Kraft Heinz Co. is controlled by 3G Capital (which holds a 23.8% stake) and Berkshire Hathaway (26.4%). Kraft Heinz is a major supplier to Walmart and has a large sales office in Northwest Arkansas.

• Kellogg CFO to retire 
Ron Dissinger, a longtime executive with The Kellogg Co., will retire as chief financial officer at the end of the year. Dissinger will remain with Kellogg into 2017 to help ensure an orderly transition to his successor. The company has already began to search for Dissinger’s replacement.
“Ron has had an extraordinary, nearly three-decade career with Kellogg, including the past six years as CFO and a highly valued member of our global leadership team,” said John Bryant, chairman and CEO of Kellogg.

“Over the years, we have relied on Ron’s business acumen, disciplined approach to finance and extensive knowledge of our global organization to provide strategic financial leadership across every aspect of our business.”

Kellogg is a major supplier to Walmart and has a sales office in Northwest Arkansas.

• Cargill sells several food brands to Ventura Foods
Ventura Foods has agreed to acquire the dressings, sauces and mayonnaise (DSM) business of Cargill. Financial terms of the transaction were not disclosed by either party.

Cargill’s DSM unit makes products such as mayonnaise, tartar sauce, flavored dressings and sauces for national food service companies and distributors. The business operates from one standalone facility in Port St. Lucie, Fla., and two facilities integrated within the broader operations of Cargill’s Fats & Oils Group in Gainesville, Ga., and Sidney, Ohio. Ventura acquired the Florida facility and will transfer the production from Georgia and Ohio to its own plants in Fort Worth, Texas and Chambersburg, Pa.

Additionally, Cargill will provide contract manufacturing services for 15 to 18 months to Ventura Foods to ensure continuity for its customers and a smooth transition to Ventura Foods. The transaction is expected to close in the second quarter of 2016.

In addition to its proprietary products produced for customers, Ventura Foods’ consumer brands available at retail include Marie’s dressings, LouAna oils, Dean’s dips and Gold n’ Soft spreads.

“The acquisition of Cargill’s DSM business furthers Ventura Foods’ strategy to grow, strengthen and diversify,” said Chris Furman, president and CEO of Ventura Foods. “It adds greater depth to our already strong capabilities and another platform for innovation. We are highly confident in our ability to successfully integrate this important business and look forward to continuing the excellent work of Cargill’s DSM team.”

While Cargill is eliminated the condiment business it will continue to produce and market cooking oils and shortening which is sold to packaged food companies and quick-serve restaurants. Cargill is also supplier to Walmart and operates a sales office in Northwest Arkansas.