Buffett Adds Heinz to His Pantry ; U.S. Investor Teams Up with Brazil's 3G to Buy Food Giant for $23 Billion

By Michael J De La Merced; Peter Lattman | International Herald Tribune, February 15, 2013 | Go to article overview

Buffett Adds Heinz to His Pantry ; U.S. Investor Teams Up with Brazil's 3G to Buy Food Giant for $23 Billion


Michael J De La Merced; Peter Lattman, International Herald Tribune


Berkshire Hathaway, the giant conglomerate that Warren E. Buffett runs, said on Thursday that it would team up with 3G capital Management, a Brazilian investment firm, to buy the food giant for about $23 billion.

Warren E. Buffett has found another American icon worth buying: H.J. Heinz.

Berkshire Hathaway, the giant conglomerate that Mr. Buffett runs, and the Brazil investment firm 3G Capital said on Thursday that they would buy the food giant for about $23 billion, adding Heinz ketchup to their stables of prominent brands.

The proposed acquisition, coming fast on the heels of a planned $24 billion buyout of the computer maker Dell and a number of smaller deals, heralds a possible resurgence in merger activity.

The number of deals and the prices being paid for companies are still a far cry from the lofty heights of the boom before the financial crisis. But an improving stock market, growing confidence among business executives and mounting piles of cash held by companies and private equity funds all favor a return to deal- making.

Mr. Buffett's partner in the deal, 3G, already owns a majority stake in a company whose business is complementary to Heinz's: Burger King.

Under the terms of the deal, Berkshire and 3G will pay $72.50 a share, about 20 percent above Heinz's closing price Wednesday. Including debt, the transaction is valued at $28 billion.

"This is my kind of deal and my kind of partner," Mr. Buffett told the CNBC television channel Thursday. "Heinz is our kind of company, with fantastic brands."

While an American icon, Heinz reaches far beyond the United States, with Asia and emerging markets accounting for some of its fastest growth. The company, which had sales of $11.6 billion in its financial year ending in April 2012, reported that revenue increased 10.7 percent in the Asia-Pacific region that year, and 6.3 percent in Europe.

In the rest of the world, the company's way of referring to everything outside the United States, Europe and Asia, sales more than doubled, largely because of an acquisition in Brazil. That compares with relatively flat results in the United States.

In many ways, Heinz fits Mr. Buffett's deal criteria almost to a T. It has broad brand recognition -- besides ketchup, it owns Ore- Ida and Lea & Perrins Worcestershire sauce -- and has performed well. Over the past 12 months, its stock has risen nearly 17 percent.

Mr. Buffett told CNBC that he had a file on Heinz dating back to 1980. But the genesis of deal announced Thursday actually lies with 3G, an investment firm backed by several wealthy Brazilian families, according to a person with direct knowledge of the matter.

One of the firm's principal backers, Jorge Paulo Lemann, brought the idea of buying Heinz to Berkshire about two months ago, this person said. Mr. Buffett agreed, and the two sides approached Heinz's chief executive, William R. Johnson, about buying the company.

"We look forward to partnering with Berkshire Hathaway and 3G Capital, both greatly respected investors, in what will be an exciting new chapter in the history of Heinz," Mr. Johnson said in a statement.

Berkshire and 3G will each contribute about $4 billion in cash to pay for the deal, with Berkshire also paying $8 billion for preferred shares. …

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