Tags: buffett | berkshire | heinz | deal

Buffett Says Plenty of Cash Left for Another Deal, CNBC Reports

Thursday, 14 Feb 2013 11:48 AM

 

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Berkshire Hathaway Inc. is putting $12 billion to $13 billion cash toward a joint buyout with 3G Capital of H.J. Heinz Co., Buffett told CNBC on Thursday.

Buffett also said he had ample cash left and was ready for another major acquisition.

"I'm ready for another elephant," he told CNBC. "Please, if you see any walking by, just call me."

Editor's Note: The Truth About the Economy — Government Documents Lead to Eerie Conclusion

The deal combines 3G's ambitions in the food industry with Buffett's hunt for growth.

Including debt assumption, Heinz valued the transaction, which it called the largest in its industry's history, at $28 billion. Berkshire and 3G will pay $72.50 per share, a 19 percent premium to the stock's previous all-time high.

The surprise purchase satisfies, at least in part, his hunt for growth through acquisition. Buffett was frustrated in 2012 by the collapse of at least two deals in excess of $20 billion and said he might have to do a $30 billion deal this year to help fuel Berkshire's growth engine.

Berkshire Hathaway already has a variety of food assets, including the Dairy Queen ice cream chain, chocolatier See's Candies and the food distributor McLane. Buffett, famed for a love of cheeseburgers, joked he was well acquainted with Heinz's products already and that this was "my kind of deal."

It does represent an unusual teaming of Berkshire with private equity, though; historically, Buffet's purchases have been outright his own. He and 3G founder Jorge Paulo Lemann have known each other for years, and Buffett said Lemann approached him with the Heinz idea in December.

For 3G, a little-known firm with Brazilian roots, the purchase is something of a natural complement to its investment in fast-food chain Burger King, which it acquired in late 2010 and in which it still holds a major stake.

Lemann, a globe-trotting financier with Swiss roots, made his money in banking and gained notoriety for helping to pull together the deals that ultimately formed the beer brewing giant AB InBev.

3G will be Heinz's operator after the deal closes, and the company will remain headquartered in Pittsburgh. Berkshire and 3G promised they would maintain the company's philanthropic commitments in the city. "It's their baby from an operational standpoint," Buffett said.  "It's a great partnership for us. And any partnership where I don't have to do the work is my kind of partnership."

The Heinz company, known for its iconic ketchup bottles, Heinz 57 sauces as well as other brands including Ore-Ida frozen potatoes, has increased net sales for the last eight fiscal years in a row.

Heinz said the transaction would be financed with cash from Berkshire and 3G, debt rollover and debt financing from J.P. Morgan and Wells Fargo. Buffett told CNBC that Berkshire and 3G would be equal equity partners.

Editor's Note: The Truth About the Economy — Government Documents Lead to Eerie Conclusion
 

© 2014 Thomson/Reuters. All rights reserved.

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