Ketchup king H.J. Heinz Co. (HNZ) agreed Thursday to be taken private by an investment consortium comprised of billionaire investor Warren Buffett's Berkshire Hathaway, Inc. (BRKA, BRKB) and New York-based investment fund 3G Capital in a deal valued at about $28 billion, including assumed debt. The deal is deemed as the largest ever in the food industry.
The deal, unanimously approved by Heinz's Board of Directors, is expected to close in the third calendar quarter of 2013. The deal is primarily subject to approval by Heinz shareholders and regulatory approvals.
"Heinz has strong, sustainable growth potential based on high quality standards, continuous innovation, excellent management and great tasting products. Their global success is a testament to the power of investing behind strong brand equities and the strength of their management team and processes. We are very pleased to be a part of this partnership," Buffett noted. The deal will see the shareholders of Pittsburgh, Pennsylvania-based maker of Heinz ketchup, Weight Watchers meals and Ore-Ida French fries, receive $72.50 in cash for each share of common stock they own.
The offer price represents a 20 percent premium over Heinz's closing share price of $60.48 on Wednesday. Heinz shares are currently surging nearly 20 percent in early deals.
Heinz stated that the deal will be financed through a combination of cash provided by Berkshire Hathaway and affiliates of 3G Capital, rollover of existing debt, as well as debt financing that has been committed by J.P. Morgan Chase & Co. (JPM) and Wells Fargo & Co. (WFC).
Berkshire Hathaway and 3G Capital have also agreed to maintain Heinz's headquartered in Pittsburgh as a private company following the closure of the deal. This will help Heinz to preserve its values, heritage and community connections, and also enable it to fulfill and continue its philanthropic support of community initiatives and related investments.
"As a private enterprise, Heinz will have an opportunity to drive further growth and advance our commitment to providing consumers across the globe with great tasting, nutritious and wholesome products," Heinz Chairman, President and CEO William Johnson said.
Heinz reported in late November a 22 percent increase in profit for the second quarter from last year, reflecting strong growth in emerging markets, improved margins and a favorable tax rate. Sales for the quarter edged up 0.5 percent to $2.83 billion from last year, with organic sales growth of 3.3 percent.
Private-equity firm 3G Capital had also taken fast food restaurant operator Burger King Worldwide Holdings, Inc. private in October 2010.
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