The Kraft Heinz Co., headquartered in Chicago and Pittsburgh, said it entered into a definitive agreement to sell its natural, grated, cultured and specialty cheese businesses to a U.S. affiliate of the French dairy giant Groupe Lactalis (Buffalo, N.Y.-based Lactalis American Group) for the purchase price of $3.2 billion. The proposed transaction is expected to close in the first half of 2021, subject to regulatory review and approval.

The transaction includes Kraft Heinz’s natural, grated, cultured and specialty cheese businesses in the United States, grated cheese business in Canada, and the entire international cheese business outside these two countries, Kraft said, including the following brands: Breakstone’s, Knudsen, Polly-O, Athenos, Hoffman’s, Cracker Barrel in the United States only, and Cheez Whiz outside the United States and Canada only.

In addition, Kraft Heinz said it will partner with Groupe Lactalis on a perpetual license for Kraft in natural, grated and international cheeses and Velveeta in shredded and international cheeses.

Kraft Heinz will retain the Philadelphia cream cheese, Kraft Singles, Velveeta processed cheese and Cheez Whiz processed cheese businesses in the United States and Canada; the Kraft, Velveeta and Cracker Barrel mac & cheese businesses worldwide; and the Kraft sauces business worldwide.

“We believe these cheese and dairy businesses will thrive in the hands of a global dairy company like Groupe Lactalis,” said Kraft Heinz CEO Miguel Patricio. “At the same time, the transaction will enable us to build [a] 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.”

As outlined in the new Kraft Heinz operating model the company also announced on Sept. 15, platform roles will help guide resource allocation and investment decisions. Kraft Heinz said it will focus on growth areas and take strategic action where appropriate. This will help to accrete the company’s growth profile, enhance strategic focus and create shareholder value.

Under the terms of the agreement, Kraft Heinz will sell production facilities located in Tulare, Calif., Walton, N.Y., and Wausau, Wis., as well as a distribution center in Weyauwega, Wis. These facilities and their employees will continue to operate in ordinary course. Approximately 750 employees will be transferred from Kraft Heinz to Groupe Lactalis.

The cheese businesses being sold contributed approximately $1.8 billion to Kraft Heinz’s net sales for the 12 months endingJune 27, 2020. Kraft Heinz said it expects to use post-tax transaction proceeds primarily to pay down debt.

RBC Capital Markets LLC served as exclusive financial advisor to Kraft Heinz for this transaction, while Paul, Weiss, Rifkind, Wharton & Garrison LLP served as legal advisors.