Shares of Kraft Foods are exploding higher in pre-market trade after the company announced a deal to merge with H.J. Heinz.
Shares of Kraft were up by as much as $US16.70, or 27.2%, to trade at around $US78 in pre-market trade on Wednesday.
This rally in Kraft shares is roughly equivalent to the $US16.50 special dividend that Kraft shareholders will receive as part of the deal in addition to Heinz shares.
The $US16.50 dividend is being financed by a $US10 billion cash infusion split equally between private equity firm 3G Capital and Warren Buffett’s Berkshire Hathaway.
In addition to the special dividend, Kraft shareholders will receive Heinz shares and own 49% of the combined company.
In a statement, Warren Buffett said: “This is my kind of transaction, uniting two world-class organisations and delivering shareholder value. I’m excited by the opportunities for what this new combined organisation will achieve.”
Here’s a look at Kraft shares in pre-market trade.