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3G Capital, Buffett’s Berkshire Hathaway agree $28bn Heinz buyout

14 Feb 2013

HeinzBurger King-backing private equity firm 3G Capital has teamed up with Warren Buffett’s Berkshire Hathaway to agree a $28bn buyout of food giant Heinz.

3G and Berkshire have arranged to pay $72.50 for each share of common stock in Heinz, and assume about $5bn of debt.

That deal represents a 20 per cent premium to the company’s closing price on February 13 and a 19 per cent premium to its all-time high share value.

Heinz, which is famous around the world for its ketchup, beans and myriad other products, expects to have revenues of more than $5.6bn and operating income of over $800m in the 2013 financial year.

It also anticipates a gross profit margin of 35.9 per cent.

The 50-50 joint takeover dwarfs the $24.4bn a consortium including Silver Lake Partners paid for computer company Dell last week – a deal which easily became the largest since the 2008 global financial crash.

3G managing partner Alex Behring said, “We have great respect for the Heinz brands and the strong business that management and its employees operate around the world.

“We approached Heinz to explore how we might work together to expand the value of this storied brand.

“We fully recognize Heinz’s value and heritage and look forward to working together with Heinz’s employees, suppliers and customers as we invest in and support the company’s ongoing global growth efforts.”

The firms said the deal would include debt financing provided by JP Morgan and Wells Fargo, as well as a rollover of existing debt.

Berkshire and 3G said they expect the buyout to be completed in the third quarter of 2013 if it gains approval from Heinz shareholders and regulatory approval.

3G has made only one other deal to date, the surprise $3.26bn buyout of hamburger chain Burger King –  a big buyer of Heinz’s products – in October 2010.

The firm is backed by Brazilian billionaire Jorge Paulo Lemann and his business partners Marcel Telles, Carlos Sicupira and Roberto Motta, who founded 3G together in 2004.

Last summer 3G took Burger King public just two years after buying it, amid increased profits from a change in tactics designed to help it be more competitive against industry giant McDonald’s and fellow burger chain Wendy’s.

Two months earlier the firm  announced its intention to sell a 29 per cent stake in the world’s second-biggest hamburger chain to London-listed Justice Holdings for $1.4bn.

Justice said it would merge with Burger King under that deal, with 3G keeping a 71 per cent holding in the new company.

Burger King chief financial officer Daniel Schwartz said at the time the Justice deal valued Burger King at an enterprise value of $8bn, double that of when it was acquired by 3G in October 2010.

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