On Thursday morning, the Cookson, Peirce and Co. investment firm owned more than 150,000 shares of H.J. Heinz Co. stock, enough for the ketchup maker to qualify as the Downtown firm's 12th largest stake.
By noon, its entire $9 million investment was sold -- turning a 40 percent profit on shares the firm had purchased less than two years ago.
In those few hours, Warren Buffett and a team of investors had dramatically altered the portfolios of major investment houses and ordinary shareholders with a $28 billion offer for the iconic Pittsburgh food company. Mr. Buffett's Berkshire Hathaway and 3G Capital were offering $72.50 per share, a 20 percent premium on Wednesday's closing price.
Executives discuss Heinz merger agreement
William R. Johnson, chairman, president and CEO of Heinz, joined Alex Behring, managing partner at 3G Capital, in discussing the agreement to merge H.J. Heinz Co. with Berkshire Hathaway and 3G Capital. (Video by Nate Guidry; 2/14/2013)
The price led local investment houses such as Cookson to shed their shares without fear of a better offer coming along, and it provided Main Street shareholders with an unexpected boost that will replace the reliable dividends that had made Heinz a popular addition to local portfolios.
Former Heinz executives and local analysts said the new ownership could mean a larger international footprint and new products for the company as it focuses beyond its domestic market.
At Cookson, investors decided to sell almost as soon as the deal was announced, since the stock value wasn't likely to fluctuate much from the offering price. With Mr. Buffett attached, the chances for another private equity suitor offering a better deal are unlikely, said Cookson president Daniel S. Henderson.
At Cookson, the ketchup maker was second only to PPG among Western Pennsylvania companies in terms of the number of shares owned. Philadelphia-based Janney Montgomery Scott LLC, which purchased Pittsburgh's Parker/Hunter Inc. in 2005, owned more than 166,000 Heinz shares. Another local firm, Monongahela Capital Management in Cranberry, owned more than 43,000 shares.
Heinz and other so-called "consumer staple" brands such as Hershey have been popular with investors who have grown impatient with low yields on bonds, Mr. Henderson said.
"It's a stock that's been performing really well for a while now," he said. Before Mr. Buffett's announcement, Heinz stock had already added nearly $10 per share in the past year.
On a national scale, the big-ticket deal could have other firms eyeing similar brands for takeover, said Mark Luschini, the Pittsburgh-based chief investment strategist at Janney Montgomery Scott.
"Investment banking tends to be somewhat copycat-oriented," he said, and other companies may start asking themselves, "What was it that Buffett and 3G saw in Heinz?"
The consensus Thursday: Whatever they saw is focused far beyond Pittsburgh's three rivers.
Ketchup has become a makeshift economic indicator in developing countries such as Indonesia, China and India, where dietary habits expand with economic growth.
"Warren Buffett would have very little interest in the company if it was just in the U.S.," said Ted Smyth, former chief administrative officer and senior vice president at Heinz. Mr. Smyth worked at Heinz for 21 years before retiring in 2009 and taking a job at the McGraw-Hill Companies.
At Mr. Smyth's office in New York, the news caused his email inbox to fill throughout the day with notes of "great buzz" from former Heinz colleagues, writing to joke about Mr. Buffett's professed taste for Dairy Queen food. Mr. Smyth wasn't sure if the ice cream shops carried Heinz ketchup, but he joked, "They better."
He still owns a significant amount of Heinz stock -- "my wife won't let me reveal" how much, he said -- and said he was pleased with the terms of the acquisition.
The financial stability afforded by a landing pad such as Berkshire Hathaway will allow Heinz to more aggressively pursue those international markets, and Mr. Smyth predicted that could mean new products and advertising for the Pittsburgh company.
Though terms of the deal reportedly require keeping the company headquarters in place, the loss of a publicly traded company in the area is "bittersweet," Mr. Luschini said. Locally, the acquisition affects a concentration of shareholders who bought stock because they were Heinz employees or wanted locally sourced portfolios.
Lucille Ganster, 87, of Glenshaw, has owned about 150 shares for several decades, purchased because her father worked in a Heinz factory and she briefly took a job as a secretary at the company after high school.
Heinz is now the latest stock in her portfolio to go from homegrown share to corporate holding.
Her Westinghouse stock, purchased when the company was wholly owned in the area, became shares of CBS and Viacom after several mergers. Her Bell Telephone Co. of Pennsylvania stock has gone by the Verizon name since a rebranding in 2000.
She has accepted the Heinz dividend since 1987, when her investment firm suggested she take the payments rather than reinvest in more stock. Hearing of the 20 percent premium on Thursday, she wished she had chosen to buy up more shares when she could.
"I know I don't have that much, darn it," she said. "It's not very many, but it's better than none."businessnews
Erich Schwartzel: email@example.com or 412-263-1455. First Published February 15, 2013 5:00 AM