Warren Buffett-led Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) and private equity firm 3G Capital Management announced Thursday they will buy the food giant H.J. Heinz Company (NYSE:HNZ) for $23 billion cash and $5 billion in debts, valuing the Ketchup maker at $28 billion.
The Brazilian investment firm 3G Capital already owns a majority stake in Burger King, whose business is complementary to Heinz’s.
Warren Buffett has long been searching for a suitable company to make big investments. After the announcement, he said, “It’s my kind of deal and it’s my kind of partner.”
Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) and 3G Capital will be equal partners in H.J. Heinz Co. (NYSE:HNZ). Under the deal, H.J. Heinz shareholders will receive $72.50 per share, a 20 percent premium to its closing price on Wednesday. Heinz shares surged 20 percent to $72.59, indicating that investors are expecting a counter offer.
Headquarters of Heinz will remain in Pittsburgh, which has been the home of the packaged food company for over 120 years. H.J. Heinz Company (NYSE:HNZ) is struggling with weaker sales in North America, but the company continues to witness strong sales in emerging markets.
“The Heinz brand is one of the most respected brands in the global food industry and this historic transaction provides tremendous value to Heinz shareholders,” said William Johnson, the chief executive of H.J. Heinz.
Buffett said that the food company has potential for strong and sustainable growth. Finances will come from Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B), affiliates of 3G Capital Management, debt financing from JPMorgan Chase & Co. (NYSE:JPM) and Wells Fargo & Company (NYSE:WFC), and rollover of existing debts. However, the companies didn’t disclose what part of cash will be contributed by 3G Capital and what portion would come from Berkshire.
The deal is expected to be completed by the third quarter of 2013. It is yet to be approved by regulatory authorities and H.J. Heinz shareholders.
Bank of America Merrill Lynch, Davis Polk & Wardwell and Centerview Partners advised Heinz on the deal. Berkshire Hathaway and 3G Capital were advised by JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Company (NYSE:WFC) and Lazard Ltd (NYSE:LAZ). The legal service was provided by Munger, Tolles & Olson.