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Heinz to Buy Kraft, Creating Global Food Giant

FILE - One of the most familiar products made by H.J. Heinz its signature ketchup.

Two of the most familiar brand names on American store shelves are joining forces to become one of the world's largest food companies.

H.J. Heinz Co., famous for ketchup, pickles and soup, is buying Kraft Foods Group Inc., known for cheese, mayonnaise and Maxwell House Coffee.

The combined company, which will be publicly traded under the name Kraft Heinz Co., will become the world's fifth biggest food manufacturer and is expected to have yearly revenue of $28 billion. It expects to save about $1.5 billion in annual costs by the end of 2017.

Heinz shareholders will own 51 percent of the combined company and Kraft shareholders the rest. The transaction is worth about $46 billion for Kraft shareholders, based on Kraft's market capitalization of $36 billion on Tuesday before news of the deal emerged.

Both brands can trace their beginnings to the 19th century, and they are staples in pantries around the world. Food industry experts see Kraft benefiting from Heinz's international presence, which generates more than 60 percent of its sales. Kraft brands are in 98 percent of North American households, the companies said, but would have a greater opportunity to expand overseas.

Heinz is expected to remain in its hometown of Pittsburgh, Pennsylvania, while Kraft's headquarters are likely to stay in Chicago.

Federal regulators and stockholders must approve the merger before it becomes final. The deal is unlikely to face regulatory hurdles as there is little overlap in products, antitrust experts said.

Some information for this report came from Reuters.