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Heinz and Kraft create food giant

Heinz is set to buy Kraft, creating one of the largest food companies in the world with annual revenue in excess of 28 billion dollars (£18 billion).

The deal was engineered by Warren Buffett's Berkshire Hathaway and the company that owns Heinz, Brazilian investment firm 3G Capital.

Berkshire and 3G will invest 10 billion dollars (£6.7 billion) in what will come to be known as The Kraft Heinz Co.

The company, the third largest of its kind in North America, will own Kraft, Heinz, Oscar Mayer, Ore-Ida and other brands.

It will maintain its headquarters in Pittsburgh, where Heinz is based, and also in the Chicago area, where Kraft resides.

Shares of Kraft jumped more than 14% before the opening bell.

Kraft shareholders will receive stock in the combined company and a special cash dividend of approximately 10 billion dollars (£6.7 billion), or 16.50 dollars per share (£11). Each share of Kraft will be converted into one share of Kraft Heinz.

Current Heinz shareholders will own 51% of the combined company, with Kraft shareholders owning a 49% stake.

Annual cost savings estimated to be 1.5 billion (£1 billion) are expected to be booked by the end of 2017.

"This is my kind of transaction," said Mr Buffett, "u niting two world-class organisations and delivering shareholder value.

"I'm excited by the opportunities for what this new combined organisation will achieve."

Heinz chief Bernardo Hees will become CEO, while Alex Behring, Heinz chairman and managing partner at 3G Capital, will be chairman.

Kraft CEO and chairman John Cahill will become vice-chairman.

The deal still needs a nod from federal regulators as well as shareholders of Kraft Foods Group, but the boards of both companies unanimously approved it.

It is expected to close in the second half of this year.

Kraft Heinz plans to keep Kraft's current dividend per share once the transaction closes. Kraft has no plans to change its dividend before the deal closes.

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