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Issue Date: Vol. 53, No. 3, March 2013, Posted On: 2/15/2013

Buffett's Berkshire Hathaway Enters Deal To Buy Heinz For $23 Billion

Emily Jed
TAGS: Heinz, ketchup maker, Warren Buffett, Berkshire Hathaway Inc., 3G Capital, Heinz acquisition, enry John Heinz, foodservice news

PITTSBURGH -- The world's most famous ketchup maker has agreed to be acquired by an investment partnership formed by billionaire Warren Buffett's Berkshire Hathaway Inc. and Brazil's 3G Capital.

Heinz shareholders will receive $72.50 in cash for each share, which represents a 20% premium over Heinz's closing share price of $60.48 on Feb. 13 and a 30% premium to the one-year average share price. Including debt assumption, the deal, which has been unanimously approved by Heinz's board, is worth $28 billion.

Tracing its roots to the horseradish business launched by Henry John Heinz in 1859, Heinz has become one of the best-recognized food companies in the world. While its iconic ketchup and condiments like Lea & Perrins Worcestershire sauce still account for half its sales, Heinz has expanded over the years to include a much broader array of products across 200 countries, including Ore-Ida French fries and Heinz baked beans.

In 2012, Heinz reported $11.6 billion in revenue and $1 billion in profit. Its net sales have increased over the past eight consecutive fiscal years. But some in the investment community have speculated that Heinz needed to be bigger to compete with larger food industry players like Kraft and General Mills.

Heinz will remain in its native Pittsburgh as a condition of the agreement with 3G and Berkshire Hathaway; 3G, an investment firm with offices in Rio de Janeiro and New York City, will control operations of the food giant, which will become a private company. The most noticeable change will be the disappearance of Heinz from the stock listing of publically traded companies.

The deal, which is subject to approval by Heinz shareholders and regulatory approvals, will be financed through a combination of cash, rollover of existing debt, as well as debt financing. It is expected to close in the third quarter.

"Heinz has strong, sustainable growth potential based on high-quality standards, continuous innovation, excellent management and great-tasting products," Buffett said.

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