Home Value Investing Berkshire Hathaway buying Heinz Unlike Any Previous Deal

Berkshire Hathaway buying Heinz Unlike Any Previous Deal

Berkshire Hathaway buying Heinz Unlike Any Previous Deal

Berkshire Hathaway buying Heinz is unlike any deal Warren Buffett has ever done.  In his past deals he was always a passive owner – he let existing management continue to run the company.  In this case 3G, a private equity firm that has done terrific turnarounds in the past, will be the new management.  They are putting in $1 billion of capital for half of ownership, but also a lot of sweat capital.  On the surface Buffett is paying 20 times earnings, a fairly high multiple even for this high-quality business, but 3G involvement will likely elevate the earnings power of Heinz significantly over time.  So this is a classic Buffett deal in one respect: Buffett is saying, I’m willing to pay a premium for a quality business that has long-term pricing power. (Heinz scores great on both counts).  Buffett is willing to pay a premium for it, but this time the premium is less than it appears on the surface.

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I was born and raised in Murmansk, Russia (the home for Russia’s northern navy fleet, think Tom Clancy’s Red October). I immigrated to the US from Russia in 1991 with all my family – my three brothers, my father, and my stepmother. (Here is a link to a more detailed story of how my family emigrated from Russia.) My professional career is easily described in one sentence: I invest, I educate, I write, and I could not dream of doing anything else. Here is a slightly more detailed curriculum vitae: I am Chief Investment Officer at Investment Management Associates, Inc (IMA), a value investment firm based in Denver, Colorado. After I received my graduate and undergraduate degrees in finance (cum laude, but who cares) from the University of Colorado at Denver, and finished my CFA designation (three years of my life that are a vague recollection at this point), I wanted to keep learning. I figured the best way to learn is to teach. At first I taught an undergraduate class at the University of Colorado at Denver and later a graduate investment class at the same university that I designed based on my day job. Currently I am on sabbatical from teaching for a while. I found that the university classroom was not big enough for me, so I started writing and, let’s be honest, I needed to let my genetically embedded Russian sarcasm out. I’ve written articles for the Financial Times, Barron’s, BusinessWeek, Christian Science Monitor, New York Post, Institutional Investor … and the list goes on. I was profiled in Barron’s, and have been interviewed by Value Investor Insight, [email protected], BusinessWeek, BNN, CNBC, and countless radio shows. Finally, my biggest achievement – well actually second biggest; I count quitting smoking in 1992 as the biggest – I’ve authored the Little Book of Sideways Markets (Wiley, 2010) and Active Value Investing (Wiley, 2007).

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