Buffett partners 3G for $28bn Heinz deal(2)

The buyout would be little known 3G’s most recent acquisition of a well-known consumer brand, after its $4bn deal for Burger King in 2010.

Berkshire
Hathaway
has teamed up
with 3G Capital
to buy Heinz.

Warren Buffett’s Berkshire Hathaway has partnered with Brazilian investment firm 3G Capital to buy Heinz in what would be one of the largest-ever buyouts in the global food industry.

“It was exciting coming into Pittsburgh today and seeing Heinz and being reminded this is a city of champions,” said Alex Behring, managing partner at 3G Capital. Heinz is headquartered in Pittsburgh, Pennsylvania, and the company's chief executive officer, William Johnson, said Heinz would not be moved out of the city. “One of the things we agreed to at the outset, I told them Pittsburgh [headquarters] was non-negotiable,” Johnson said during a press conference Thursday.

The investment group will pay $72.50 in cash for each share of Heinz common stock, which values the transaction at $28 billion, including the assumption of company debt. The per share price represents a 20 percent premium to Heinz’s closing share price of $60.48 on 13 February. The company was trading around $72.40 per share by Thursday afternoon. The deal is expected to close in the third quarter.

The deal will be financed through a combination of cash provided by Berkshire and 3G, rollover of existing debt and debt financing committed by JP Morgan and Wells Fargo. 

I told them Pittsburgh [headquarters] was non-negotiable

William Johnson

While Berkshire, the holding company run by Buffett, needs no introduction, 3G is a little known private investment firm “focused on long-term value creation”. The firm in 2010 acquired Burger King Holdings for $4 billion, including the assumption of company debt.

3G was founded by a group including Brazilian billionaire Jorge Paulo Lemann. Other senior executives at 3G include Behring, co-founder of 3G and a former partner at GP Investimentos, and Daniel Dreyfus, who became a partner at 3G in January and worked as a portfolio manager at Goldman Sachs Investment Partners and Goldman Sachs Principal Strategies from 2000 to 2012.

Buffett has long held disdain for the way private equity firms do business, famously comparing private equity firms to “porn shop operators”.

“You can sell [a company] to Berkshire, and we’ll put it in the Metropolitan Museum; it’ll have a wing all by itself; it’ll be there forever,” he said, according to media reports at the time. “Or you can sell it to some porn shop operator, and he’ll take the painting and he’ll make the boobs a little bigger and he’ll stick it up in the window, and some other guy will come along in a raincoat, and he’ll buy it.”