Warren Buffett finally finds big target in Heinz

February 14, 2013
February 14, 2013

Warren Buffett has talked about his search for a big deal for several years and he finally found his mark today with the announcement of Berkshire Hathaway and 3G Capital’s $28 billion acquisition of Heinz announced this morning.

In October, Buffett told CNBC that he was “salivating” for a big deal. In 2011 in a letter to investors, he famously said that his “elephant gun has been reloaded and my trigger finger is itchy.”

For Heinz, Buffett decided to partner with Brazilian investors 3G Capital, which owns Burger King (automatic synergies of fries and ketchup) and also has an investment in Anheuser-Busch InBev.

“Heinz has strong, sustainable growth potential based on high quality standards, continuous innovation, excellent management and great tasting products,” Buffett said in a statement regarding the deal.

The deal shows how far Heinz has come since it was under fire from activist investor Nelson Peltz, who launched a proxy fight to gain five seats on Heinz’s board and managed to obtain two director spots in 2006. It was seen as one of the most ugly proxy fights in recent years, with the two sides hurling insults at one another.

Since then Peltz and Heinz CEO William Johnson built a productive working relationship and now trade compliments. In November, Heinz reported a 22% rise in earnings, partly because of its performance in emerging markets.

Berkshire and 3G agreed to pay $72.50 per share for Heinz, representing a 20% premium to Heinz’s closing stock price yesterday. Investors rallied around the deal in pre-market trading, sending Heinz shares up by about 20% to $72.60.

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