What: Shares of snack food giant Kraft leapt 37% during the month of March, according to S&P Capital IQ data.
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So what: Shareholders can thank none other than investing legend Warren Buffett for those quick gains. His Berkshire Hathaway conglomerate, along with partner 3G Capital, announced a merger of Kraft with the H.J. Heinz Company. The resulting food giant will control eight brands that each account for more than $1 billion of sales per year. "This is my kind of transaction," Buffett said in a press release. "I'm excited by the opportunities for what this new combined organization will achieve."
Now what: Kraft shareholders can expect a one-time special cash dividend of $16.50 per share, or $10 billion total, due to hit their accounts as soon as the merger closes. From that point on, Kraft investors who stick around will own 51% of the newly merged entity.
Sure, this deal won't fix Kraft's significant business struggles. Those include zero revenue improvement last year on organic sales growth that was below 1%. However, Berkshire and 3G Capital have a stellar track record for long-term ownership of businesses like these. And shareholders should approach their decision on whether to cash out last month's gains with a similar focus on the long term.
The article Why Kraft Foods Group Inc. Stock Soared 37% in March originally appeared on Fool.com.
Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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