Breaking News on Food & Beverage Development - North AmericaEU edition | Asian edition

News > Manufacturers

Buffett investment group Berkshire Hathaway teams up with 3G to buy Heinz in $23bn mega-deal

By Elaine WATSON , 14-Feb-2013

UPDATED - H.J. Heinz Co. has agreed to be acquired by Warren Buffett’s Berkshire Hathaway investment firm and Brazilian private-equity giant 3G Capital for $23.3bn, in what it claims is the largest deal ever struck in the food industry.

Under the deal, which has been unanimously approved by Heinz’s board and is expected to close in the third quarter, shareholders will receive $72.50 in cash for each share, a 20% premium on yesterday’s closing price.

Including debt assumption, the deal is worth a whopping $28bn.

Johnson: 'We did not solicit this'

The Heinz deal is the latest in a series of mega-deals in the food sector, following Campbell Soup's acquisition of Bolthouse Farms, Kellogg's acquisition of Pringles and ConAgra's deal to buy Ralcorp

Speaking at a press conference this morning, Alex Behring, Managing Partner at 3G Capital, said Berkshire Hathaway and 3G have pledged to maintain Pittsburgh as its global headquarters.

While it was too early to talk about cost cutting measures, jobs or synergies, he said that "in contrast" to other companies 3G had acquired, Heinz was doing "extremely well", and that 3G was interested in "long-term value creation".

He added: "This is a historic day for the food industry, a landmark transaction... We're very excited about the brand, which is a truly global brand, really a powerhouse brand."

Asked how the talks began, Heinz Chief Executive William R. Johnson said that Behring had approached him about eight weeks ago, with talks beginning in earnest around six weeks ago.

But he added: "We did not solicit this."

Heinz had been approached from a "position of strength" and in the short term, it would be business as usual for staff at the firm's Pittsburgh HQ, he stressed. 

Asked about management changes following the deal, he said that there had been "no discussions yet", but that he was "way too young to retire".

Buffett: 3G will be the “operational guys” at Heinz if the deal is finalized.

Warren Buffett, Chairman and CEO of Berkshire Hathaway said: “Heinz has strong, sustainable growth potential based on high quality standards, continuous innovation, excellent management and great tasting products.”

Buffett told CNBC that 3G - which owns a majority stake in Burger King – would be the “operational guys” at Heinz if the deal is finalized.

Heinz ketchup, Classico sauces, Smart Ones

In addition to its iconic ketchup, Heinz makes Classico spaghetti sauces, Ore-Ida potatoes and Smart Ones frozen meals. Founded by Henry J Heinz in 1869, it now employs 32,000 people, and generated sales of $11.6bn in 2012, with Europe its biggest market ($3.4bn) followed by the US ($3.2bn). 

Berkshire and 3G will each contribute about $4bn in cash to pay for the deal, with Berkshire also paying $8bn for preferred shares. The rest of the cost will be covered by debt financing raised by JPMorgan Chase and Wells Fargo.

While it dwarfs most of the others in size, the deal is the latest in a series of large transactions in the food industry over the past year, coming hot on the heels of Kellogg's acquisition of Pringles; ConAgra's deal to buy Ralcorp, and Campbell Soup's purchase of Bolthouse Farms. 

The collapse of Hostess Brands has also prompted a feeding frenzy with several deals to acquire Twinkies, DingDongs and other brands expected to be finalized in the coming weeks as the auction process begins.