Billionaire Warren Buffett’s investment powerhouse Berkshire Hathaway Inc and Brazilian-led 3G Capital LLC announced on Thursday that they would take over US ketchup maker HJ Heinz Co in a deal worth US$28 billion.
The buyers heralded 144-year-old Heinz’s strong global portfolio of prepared food brands, which Buffett called “great-tasting” products.
The two buyers will pay Heinz shareholders US$72.50 per share in cash — a 20 percent premium on Heinz’s stock closing price on Wednesday.
Counting debt assumed by the buyers, the deal valued Heinz at about US$28 billion, the largest-ever food company takeover, they said.
Buffett, founder and chairman of Berkshire Hathaway Inc, told CNBC that 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 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,” he said.
3G Capital managing partner Alex Behring 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 at a press conference in Pittsburgh, Pennsylvania, the home base of Heinz.
With US$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 the US.
However, its main products are the iconic Heinz ketchup, sold globally, and one of its earliest favorites in the US, canned baked beans.
“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.
No major changes are expected at Heinz, Johnson and Behring said, and the company will remain based in Pittsburgh, they added.
“It is really about long-term value creation,” Behring said.
The deal is a big one for Berkshire Hathaway, the company has been searching for lucrative ways to invest its US$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 Grupo Modelo.
They also control Burger King, after a US$4 billion takeover deal in 2010.
The deal is subject to approval by Heinz shareholders and is expected to be completed in the third quarter of this year.