Kraft Heinz (NASDAQ: KHC) is selling part of its cheese business to a U.S. affiliate of the France-based dairy corporation Lactalis Group in order to pay down debt. The sale is expected to close during the first half of 2021, pending regulatory approvals.
Included in the $3.2 billion sale are Breakstone's, Polly-O, Athenos, Hoffman's, Knudsen, Cracker Barrel in the U.S. only, and Cheez Whiz (outside of the U.S. and Canada). All brands account for a net sales of $1.8 billion over the last year.
Despite selling several well-known brands, Kraft Heinz will retain many popular names as well, including Philadelphia Cream Cheese and Kraft Singles, as well as its macaroni and cheese business.
"The people of Kraft Heinz have built an extraordinary portfolio of high-quality cheese products and brands that consumers love and trust," said Lactalis North America CEO Thierry Clement, "and we are honored to have been chosen by Kraft Heinz to help carry this legacy forward."
"We believe these cheese and dairy businesses will thrive in the hands of a global dairy company like Groupe Lactalis," said Miguel Patricio, Kraft Heinz CEO. "At the same time, the transaction will enable us to build sustainable competitive advantage in businesses where we have stronger brand equity, greater growth prospects and can use our manufacturing scale and consumer-based platforms approach. This is a great example of agile portfolio management at work."
Announcement of this sale follows, among other events, the $1.2 billion deal of last year when Kraft Heinz sold its natural cheese business in Canada.
In context, news of sales at Kraft Heinz to pay down debt may not come as a complete surprise, considering that Kraft Heinz has been struggling for some time as consumers move away from heavily-processed foods and show increased interest in fresher, healthier foods overall.
The $3.2 billion deal includes production facilities in Tulare, California; Wausau, Wisconsin; and Walton, New York, meaning that Kraft Heinz will lose roughly 750 employees in the move. Lactalis Group already has eight plants in the U.S. with about 2,600 employees.