Sage of Omaha, Warren Buffett, shells out $23bn for Heinz foods
He is taking the baked beans and ketchup giant back into private hands in the food business's biggest buyout
Nikhil Kumar is The Independent's New York correspondent. He was formerly assistant editor on the foreign desk and has also done a variety of jobs on the city desk, where he wrote about markets, commodities and other business and economics topics.
Thursday 14 February 2013
Warren Buffett is paying $23bn (£15bn) to buy Heinz, the sprawling food giant, in a deal that sees him teaming up with the investment company behind Burger King to bring the American business back into private hands.
The renowned investor's Berkshire Hathaway conglomerate and 3G Capital, the investment firm which bought Burger King in 2010, have agreed to pay $72.50 per Heinz share, 20 per cent more than the company's closing share price on Wednesday, in a deal backed by the Heinz board.
The $28bn agreement for the business, which produces everything from baked beans and ketchup to baby food, includes $5bn debt and ranks as the biggest buyout in the food business, not counting deals involving drinks companies.
The announcement, which came early Thursday morning and sent Heinz's New York-listed shares up by about 20 per cent, follows Mr Buffett's letter to Berkshire shareholders in 2011 when he said he was looking at deals to expand his portfolio's non-insurance businesses. "We're prepared. Our elephant gun has been reloaded and my trigger finger is itchy," he said.
After unveiling the deal to which Berkshire will contribute between $12bn and $13bn, taking control of half of Heinz, Mr Buffett – who is often referred to as the Sage of Omaha because of his stellar track record – suggested that another big acquisition might be in the offing. "I'm ready for another elephant," he told CNBC. "Please, if you see any walking by, just call me."
He added that his partners at 3G Capital would be responsible for running the business once the deal, which is expected to close near the end of the year, was finalised. "It's their baby from an operational standpoint," he said.
All told, Heinz employs some 32,000 worldwide, with its products enjoying bestselling status in more than 50 countries. Although the company sought in a letter to staff to reassure that the deal would not interrupt its operations, saying it expected to continue to function in a "business as usual" mode, there were concerns about potential job losses, not least because of 3G Capital's record. After buying Burger King, the investment house went on a cost-cutting spree, including layoffs.
The Unite union called for an urgent meeting with the company and its buyers to seek assurances about the 3,000 employees across Heinz's eight sites in the UK and Ireland.
Given the company's roots in Pittsburgh – Henry John Heinz founded the business in the Sharpsburg suburb of that US city in 1869 – the buyers have pledged to keep the company's headquarters there.
"The Heinz brand is one of the most respected brands in the global food industry, and this historic transaction provides tremendous value to Heinz shareholders," Heinz's chief executive, William Johnson, said. "We look forward to partnering with Berkshire Hathaway and 3G Capital – both greatly respected investors – in what will be an exciting new chapter in the history of Heinz."
Double act billionaire pair who sealed deal
Although it was Warren Buffett's name that caught everyone's eye when the Heinz deal was unveiled yesterday, his partner is no small fry.
3G Capital, which will pitch in with half the price tag and be responsible for running the giant food business, is backed by the billionaire Jorge Paulo Lemann who, though not as wealthy as Mr Buffett, pictured, is not short of a few pennies. His net worth as of March last year stood at around $12bn (£7.7bn), according to Forbes magazine, against Mr Buffett's $40bn-plus. He is a major shareholder and board member of the brewing giant Anheuser-Busch.
Mr Lemann, a Brazillian businessman born to Swiss immigrants, and Mr Buffett are believed to have become friends when both served on the board of Gillette in the late Nineties.
In 2010, Mr Lemann, along with Marcel Telles and Carlos Sicupira, his billionaire partners in 3G, bought Burger King, taking it private to restructure the business before re-listing it in New York last year.
Bean there … a history of Heinz
Henry J Heinz, together with fellow businessman L Clarence Noble, founds Heinz & Noble, whose first product is horseradish. The company is not a success, going bankrupt in 1875.
Henry Heinz sets up another business, this time with two members of his family. C F & J Heinz Company, it starts selling Heinz Tomato Ketchup.
Henry Heinz brings over a number of products to the UK, showing them to a buyer from Fortnum & Mason who decides to buy the lot.
Heinz's 57 Varieties slogan is born after Henry Heinz sees an advert for a shoe company boasting about its 21 styles. Henry chooses 57 for his version, even though the company was making more products than that, as he sees it as a lucky number. In the same year, Heinz launches its first overseas office, in London.
The company's first UK factory is opened, in Peckham, south London.
Heinz Cream of Tomato Soup makes its debut in the UK.
Heinz, which by now is led by Henry's son, Howard Heinz, introduces baby food as well as ready-to-serve soups in response to the Depression.
Heinz Tomato Ketchup disappears from the UK as the Second World War leads to a shortage of ingredients – it doesn't appear again until 1948.
The company is granted a Royal Warrant.
Heinz's factory in Wigan is opened.
The slogan Beanz Meanz Heinz is launched, having been devised by the advertising executive Maurice Drake. Forty-five years later, in 2012, it is voted the best advertising slogan of all time in a poll by Creative Review magazine.
The company launches a new plastic bottle for its ketchup.
The ketchup bottle is given another makeover as the top-down bottle is brought out.
By snapping up HP Foods, Heinz takes control of brands including HP Sauce and Lea & Perrins Worcestershire Sauce.
Company launches its It Has To Be Heinz marketing campaign.
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