3G Capital, the Brazilian private-equity firm, agreed to acquire Kraft Foods Group Inc. in partnership with Warren Buffett’s Berkshire Hathaway Inc. and merge it with ketchup maker H.J. Heinz.

Kraft shareholders will receive 49% of the stock in the combined company, plus a special cash dividend of $16.50 a share, the companies said in a statement on Wednesday. Berkshire and 3G will invest another $10 billion in the combined company, according to the statement.

“This is my kind of transaction, uniting two world-class organizations and delivering shareholder value," Buffett said in the statement. “I’m excited by the opportunities for what this new combined organization will achieve."

The current Kraft was created in a spinoff from Mondelez International Inc. in October 2012. Mondelez inherited the company’s overseas snack businesses, giving it bigger growth opportunities internationally. Kraft, meanwhile, is focused on the U.S. While Kraft has a stable of household brands, including Velveeta and Philadelphia Cream Cheese, the company has struggled to reignite sales growth in a mature market.

Kraft closed at $61.33 in New York trading Tuesday giving the company a market value of about $36 billion.

Kraft management also has been in turmoil in recent months. Chief Executive Officer Tony Vernon stepped down in December, with Chairman John Cahill taking over the job. Brian Yarbrough, an analyst with Edward Jones and Co. in St. Louis, speculated at the time that Vernon was pushed out due to poor performance. The company’s top finance and marketing executives also left in February, and Kraft added the role of chief operating officer.

Younger consumers

Younger consumers in the US have shown a preference for natural and organic ingredients—something Northfield, Illinois-based Kraft has had to adjust to. In addition, rising commodity prices have squeezed the company, according to Yarbrough.

The company also had an embarrassing product recall this month after customers found metal pieces in its hallmark Macaroni and Cheese. Kraft recalled 6.5 million boxes of the product.

Berkshire Hathaway teamed up with 3G Capital two years ago to acquire Heinz and then helped finance 3G-owned Burger King Worldwide Inc.’s purchase of Canadian coffee-and-doughnut chain Tim Hortons Inc.

Since those deals, speculation has simmered about what they’ll buy next—be it Kellogg Co., Kraft or Mondelez. Buffett stoked the conversation with his annual letter to Berkshire shareholders, saying he expects to “partner with 3G in more activities."

Berkshire has been a longtime investor in Kraft, tracing back to a stake in its predecessor company, part of Buffett’s investments in well-known consumer businesses. Buffett has acquired and held stakes in a range of dominant consumer brands, including Coca-Cola Co. The billionaire began paring his stake in Kraft Foods Inc. in 2010 after disagreeing with Kraft’s decision to sell its pizza brands to help pay for a takeover of Cadbury Plc.

Buffett criticized then-Kraft CEO Irene Rosenfeld for the Cadbury transaction and the sale of the pizza businesses. “Both deals were dumb," he told Berkshire investors at the time. Berkshire was the biggest shareholder of Kraft with a stake valued at $3.3 billion at the end of December 2010.

Buffett looks for targets that have strong brands, simple businesses and consistent earnings power.

3G, co-founded by Brazilian billionaire Jorge Paulo Lemann, is known for squeezing costs out of its acquisitions and cutting jobs. Kraft had 22,100 employees at the end of last year, though that number was down almost 1,000 from two years earlier.

3G disclosed in a November regulatory filing that it is raising a fourth special situations fund, without identifying the fund’s size. A person with knowledge of the matter said earlier this year it will be about $5 billion.

Bankers from Lazard Ltd. advised Heinz, while Cravath, Swaine and Moore and Kirkland and Ellis acted as legal advisers. Centerview Partners LLC served as adviser for Kraft, and Sullivan and Cromwell acted as legal adviser.

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