Consortium including Warren Buffett to buy Heinz for $28 billion


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In a region liberally doused in Heinz traditions, the news released this morning that the Pittsburgh ketchup company had agreed to be acquired for $28 billion by outside investors was guaranteed to send shockwaves through the community.

William R. Johnson, the chairman, president and CEO, acknowledged that this morning at a press conference at Heinz headquarters in PPG Place, Downtown. "It is a truly historic moment for the H.J. Heinz Co.," as well as customers, employees and the city of Pittsburgh, he told media gathered for details on the agreement.

Later, when reporters were pressing for more information on Pittsburgh's role in the company's future under new ownership, he noted that keeping the headquarters here is in the contract agreed upon by the investment consortium composed of Berkshire Hathaway and 3G Capital.

"I told them Pittsburgh was non-negotiable," he said.

Mr. Johnson, who was joined in the press conference by Alex Behring, managing partner at 3G Capital, said the company has about 1,200 employees in Pittsburgh. The company no longer makes products here but has its headquarters Downtown and a research facility in Marshall.

If the deal receives regulatory and shareholder approval, it could close in the third quarter, giving the investors control of the company founded in Sharpsburg more than a century ago.

Shareholders will receive $72.50 in cash for each share of common stock they own, in a transaction valued at $28 billion, including the assumption of Heinz's outstanding debt.

The per share price represents a 20 percent premium to Heinz's closing share price of $60.48 Wednesday, a 19 percent premium to its all-time high share price and a 30 percent premium to the one-year average share price.

Mr. Johnson said he was thrilled with the offer, which creates tremendous value for shareholders.

"Today's announcement confirms the value of what we have achieved," he said.

Heinz did not solicit the deal, Mr. Johnson said. He said he was approached about two months ago by the investors and found the deal compelling. He shared it with the board, which hired advisors to review the offer and ultimately approved it.

Both men said being freed from the obligations of a public company would allow Heinz to be more nimble and competitive as it grows globally. The company sells products around the world, with strong operations in countries such as China, Russia, Brazil, India and the United Kingdom.

In the official announcement released this morning, Warren Buffett, chairman and CEO of Berkshire Hathaway, praised Heinz's growth potential based on its quality, innovation, management and 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."

Berkshire Hathaway and 3G Capital have pledged to fulfill and continue Heinz's philanthropic support of community initiatives and related investments.

The transaction 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 and Wells Fargo. Berkshire Hathaway owns and invests in businesses across a variety of industries, including numerous iconic brands. 3G Capital is a global investment firm creating value for investors in the long term.

In addition to its flagship ketchup product, Heinz brands include Ore-Ida and Smart Ones.

businessnews

Teresa F. Lindeman: tlindeman@post-gazette.com or at 412-263-2018. First Published February 14, 2013 1:15 PM


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