Berkshire Hathaway (with 3G Capital) is acquiring Heinz for $28 billion (20% premium) at $72.50 per share. Berkshire is investing $12 1/2 – $13 billion ($4.5 billion in equity plus $8 billion in preferred stock) and will have a 50% equity stake. Warren Buffett is still looking to invest up to $14 billion for another large acquisition.
Heinz is a typical company that Warren Buffett (Berkshire Hathaway) likes to acquire. It dominates the ketchup market and is well run. Buffett had a very large investment in General Foods in the 1980’s. It was subsequently acquired by Philip Morris in 1985. Berkshire likes stable food companies which have “large moats” protecting their brands. This results in a durable competitive advantage that Buffett seeks. Berkshire’s largest equity holding since 1988 is in Coca-Cola. It also has a large stake in Kraft.
I am quoted in a Bloomberg article on this topic:
Heinz “just comes to mind as almost synonymous with ketchup, just as Coca-Cola is almost synonymous with soda,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business.
The entire article is available at: