The Securities and Exchange Commission today obtained a court order freezing assets in a Swiss bank trading account that regulators said was used to generate more than a $1.7 million windfall from trading H.J. Heinz securities in advance of news that the Pittsburgh company will be acquired.
The SEC said it does not know who the traders are, but that they had inside information about the pending announcement that Berkshire Hathaway, whose chairman is legendary investor Warren Buffett, and 3G Capital, a New York private equity firm, intended to acquire Heinz for $28 billion. The price tag includes Heinz debt the buyers will assume.
The announcement was made Thursday. On Wednesday, the traders purchased Heinz call options, the SEC said. Call options give their holder the right to acquire shares of the company at a specified price over a certain period of time.
The acquisition news caused Heinz share's to jump nearly 20 percent, increasing the value of the options.
SEC officials said the activity was suspicious because the bank account used to make the trades had not traded Heinz securities in the last six months.
"Irregular and highly suspicious options trading immediately in front of a merger or acquisition announcement is a serious red flag that traders may be improperly acting on confidential nonpublic information," Daniel M. Hawke, the head of the SEC's enforcement unit, said in a statement.
Len Boselovic: email@example.com or 412-263-1941. First Published February 15, 2013 9:30 PM