Berkshire, 3G buy ketchup maker Heinz in $28-B deal

WASHINGTON, USA – Billionaire Warren Buffett’s investment powerhouse Berkshire Hathaway and Brazilian-led 3G Capital announced Thursday, February 14, they would take over venerable US ketchup maker Heinz in a deal worth US$28 billion.

The buyers heralded 144-year-old HJ Heinz Co’s strong, global portfolio of prepared food brands, which Buffett called “great tasting” products.

The two buyers will pay Heinz shareholders $72.50 per share in cash — a 20% premium on Heinz’s Wednesday closing price.

Counting debt assumed by the buyers, the deal valued Heinz at about $28 billion, the largest-ever food company takeover, they said.

Buffett, founder and chairman of Berkshire Hathaway, told CNBC the deal was the idea of 3G Capital’s Brazilian founder, Jorge Paulo Lemann, and that the two would split the equity in Heinz 50-50, with 3G taking responsibility for management.

“Heinz is our kind of company with fantastic brands,” he said. “It’s my kind of deal and it’s my kind of partner.”

Heinz shares later soared to $72.50 on the New York Stock Exchange, adding to a 17% gain over the past 52 weeks.

Berkshire Hathaway’s B shares gained 1.3%, to $99.21.

“Heinz has strong, sustainable growth potential based on high quality standards, continuous innovation, excellent management and great tasting products,” Buffett said in a statement announcing the deal.

“Their global success is a testament to the power of investing behind strong brand equities and the strength of their management team and processes.”

Alex Behring, managing partner at 3G Capital, said his company was very excited about the Heinz name.

“It has incredible consumer perception around the world. It is really a powerhouse brand,” he said in a press conference in Pittsburgh, Pennsylvania, the home base of Heinz.

Heinz: Not just ketchup

With $11.6 billion in global sales last year, Heinz is one of the largest US food companies.

It owns top prepared food brands such as ABC sauces in Asia, Quero sauces in Latin America, Golden Circle in Australia, Ore-Ida frozen potatoes sold globally, Honig in the Netherlands, Plasmon baby food in Italy, and Smart Ones low-calorie frozen foods in North America.

But its main products are the iconic Heinz ketchup, sold globally through markets and fast-food vendors, and one of its earliest favorites in the United States, canned baked beans.

It has a powerful portfolio of popular food brands in markets around the world. Heinz Tomato Ketchup and the company’s Lea & Perrins Worcestershire Sauce are distributed globally.

“With Heinz stock recently at an all-time high and 30 consecutive quarters of organic topline growth, Heinz is being acquired from a position of strength,” Heinz chairman and chief executive William Johnson said, defending the deal.

Johnson and Behring stressed that they don’t expect any major changes at Heinz, which they said will remain based in Pittsburgh.

“It is really about long-term value creation,” said Behring.

“This company is being acquired from a position of strength,” Johnson told reporters. “Our goal here is to make this a bigger, even more global company.”

Big one for Berkshire

The deal is a big one for Berkshire Hathaway, Buffett’s wildly successful investment fund.

Berkshire has been searching for lucrative ways to invest its $47 billion cash hoard in an environment of low interest rates and intense competition from other cash-rich investment funds for merger and acquisition opportunities.

3G Capital is coming off some of its own blockbuster deals. Its principals built and control the brewing titan Anheuser Busch InBev, now seeking to take over Mexico’s Modelo.

And they also control Burger King, after a $4 billion takeover deal in 2010.

The deal is subject to approval by Heinz shareholders, and is expected to be completed in the 3rd quarter of 2013. – Rappler.com