Friday, March 1

Buffett's Berkshire in $23 billion deal to buy Heinz

Buffett's Berkshire in $23 billion deal to buy HeinzStaff reports , – 3 days

Two iconic brands -- legendary investor Warren Buffett and 125-year-old ketchup-maker H.J. Heinz -- are coming together in the largest deal ever in the food industry's history.

Heinz confirmed Thursday that it agreed to be acquired by Buffett's Berkshire Hathaway and 3G Capital Management for $72.50 a share, or $23.3 billion. Including debt, the deal is valued at $28 billion. The deal was first announced on CNBC.

Berkshire and and 3G will each put up $4.4 billion in equity for the deal, along with debt financing from JPMorgan Chase and Wells Fargo. Berkshire is also buying $8 billion of preferred stock that pays 9 percent.

The deal is an unusual one for Buffett since he is partnering with 3G, a Brazilian investment firm that owns a majority stake in Burger King. Typically, Buffett prefers to make his acquisitions outright. However, the billionaire investor told CNBC that he was approached with the idea for the deal in December, and thought it was "my kind of deal."

"This is my kind of deal and my kind of partner," he added. "Heinz is our kind of company with fantastic brands." Buffett added, "but I have a file on Heinz that goes back to 1980."

3G founder Jorge Paulo Lemann approached Buffett in mid-December about a possible deal, and both approached William Johnson, Heinz's chairman, president and CEO, soon after. The first offer was made in mid-January.

According to Buffett, 3G will be the primary supervisor Heinz's operations after the deal closes. Other 3G founders include Carlos Alberto Sicupira, Marcel Hermann Telles, Roberto Thompson Motta, and Alex Behring. "We look forward to partnering with Berkshire Hathaway and 3G Capital, both greatly respected investors, in what will be an exciting new chapter in the history of Heinz," Johnson said in a statement.

Buffett noted that the Heinz deal leaves Berkshire with enough cash on hand to bag another "elephant."

Berkshire and 3G were both advised by Lazard, JPMorgan, and Wells Fargo. 3G's legal advisor was Kirkland & Ellis and Berkshire was advised by Munger, Tolles & Olson.

Heinz was advised by Bank of America/Merrill Lynch, Centerview Partners, and Davis Polk & Wardwell.

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