SUBSCRIBE

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

News > Markets

FBI probes suspicious trading in Heinz shares prior to Buffett mega-deal

By Elaine WATSON , 20-Feb-2013

The FBI is joining an investigation into suspicious trading in Heinz shares the day before it announced that it had agreed to be taken over by Berkshire Hathaway and 3G Capital in a $23.3bn megadeal.

The Securities and Exchange Commission (SEC), is also suing unnamed traders for insider trading (click here for details).

"The FBI is aware of trading anomalies the day before Heinz's announcement,” the bureau told reporters. “The FBI is consulting with the SEC to determine if a crime was committed."

The SEC, which has secured an emergency court order to freeze assets in a Swiss bank account, believes that some traders used privileged information to make $1.7m by buying Heinz shares before the deal was announced, knowing that the price would go up.  

In its complaint , filed in New York against "certain unknown traders in the securities of H.J. Heinz company", the SEC alleges that the traders were in possession of "material nonpublic information" about the impending deal when they bought Heinz call options last Wednesday.

Irregular and highly suspicious options trading

The timing and size of the trades were suspicious because the account through which the traders purchased the options had no history of trading Heinz securities in the last six months. Meanwhile, overall trading activity in Heinz call options in the days before the announcement had been minimal, said the SEC.

Freezing the account ensures that potentially illegal profits cannot be siphoned off while the investigation continues, said Daniel Hawke, who heads up the SEC’s market abuse unit.

"Irregular and highly suspicious options trading immediately in front of a merger or acquisition announcement is a serious red flag that traders may be improperly acting on confidential non-public information."

There is no suggestion that Heinz or its suitors have committed any wrongdoing.

Click here to read more about the Heinz deal.