UPDATE 1-Kraft Heinz to sell several cheese businesses to Lactalis for $3.2 bln

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CHICAGO, Sept 15 (Reuters) - Kraft Heinz Co said on Tuesday that it will sell several of its cheese businesses to a U.S. affiliate of France’s Groupe Lactalis for $3.2 billion.

After weak sales results and several billion-dollar writedowns over the past two years, there has been market speculation about which categories Kraft Heinz will offload from its balance sheet. The company has reportedly also looked for buyers for its Maxwell House coffee business and Ore-Ida frozen potatoes brand.

Tuesday’s deal, which is expected to close in the first half of 2021, includes Kraft Heinz’s U.S. natural, grated, cultured and specialty cheese businesses - including its Breakstone’s and Cracker Barrel brands - and its grated cheese business in Canada. Kraft Heinz is also selling its International Cheese unit outside of Canada and the United States.

The Chicago-based company will retain its Philadelphia, Kraft Singles, Velveeta and Cheez Whiz brands in the United States and Canada. It will also keep the Kraft, Velveeta and Cracker Barrel Mac & Cheese businesses worldwide.

A banking source not involved in the deal said the shredded cheese business in the United States would likely be attractive to Lactalis, as it is “extraordinarily profitable”.

“Buying pre-shredded cheese is like giving money away,” the source said. (Reporting by Richa Naidu in Chicago and Martinne Geller in London; Editing by Lisa Shumaker)