Buffett and 3 g buy Heinz

Began with a cordial dinner in a restaurant in Florida, in the United States, the largest deal ever done sewing in the global food industry. At the meeting, a financially enticing proposal has been submitted to the President of the Board of Directors and CEO of Heinz Company, William Johnson. The conversation lasted a few hours and were only present Jorge Paulo Lemann, Alex Behring, both from investment firm 3 g Capital, and Johnson. But it was decisive.
Just eight weeks later, the holding company Berkshire Hathaway, Warren Buffett, American investor and the 3 g Capital announced an agreement to acquire 100% of Heinz. The announcement was made yesterday morning.
In this way, the Brazilian Jorge Paulo Lemann, Marcel Telles and Carlos Alberto Sicupira-the trio of partners that created Anheuser-Busch InBev (AB Inbev) and owns the Burger King-became controllers of Heinz, one of the largest food companies in the United States, with 144 years and $ 11.6 billion in annual sales.
In two months, Buffett and Lemann organized an operation that emerged almost casual. Buffett and Lemann met in December on a flight and, between a conversation and another, Lemann introduced the idea. Buffett, at the same time, proved favorable. In that conversation, agreed that 3 g would be with the management of the business, if the idea is progressing. Buffett said the Lemann that followed the Heinz, owner of the world's most famous ketchup, "very closely", since the years 80. Two weeks after the meeting of the two businessmen, the project began to be placed on the foot, which took over six weeks. It was announced yesterday. The 3 g conducted all the negotiations, showed the value.
The partners plan to close the capital of Heinz on the New York Stock Exchange, following the strategy applied in the Burger King
Among the measures agreed upon between the partners, is the plan to close the capital of the company on the New York Stock Exchange, according to the Value found with source close to the operation. This was done with the Burger King, when Brazilians of 3 g have acquired control of the network in 2010.
"This is my business and my partner," summed up yesterday Buffett, the TV network CNBC. For $ 28 billion, Berkshire Hathaway and 3 g Capital acquires the company, with the payment of $ 72,50 per share of Heinz, which amounts to little more than $ 23 billion in cash. The remainder, $ 5 billion, is equivalent to the company's debts assumed by investors. Berkshire will invest $ 12 billion to $ 13 billion in the acquisition. Operation is subject to the approval of shareholders of Heinz and regulatory authorities of the United States, but must be approved, say analysts.
The transaction is performed through a combination of cash generated by Berkshire Hathaway and 3 g Capital affiliates. Investment firms shall have, each, $ 4.5 billion stake in the share capital of the company. The holding company for Buffett will have an additional slice of $ 8 billion in preferred securities. The transaction should be completed by the third quarter of this year.
It was an operation done by analysts. Market reports, considered the acquisition "a fabulous deal" for shareholders of Heinz (the award is 20% of the value of the closing role in Wednesday's trading session). Yesterday, the roles of Heinz opened high and closed the day on high 19.87%, to $ 72,50, the value offered by the partners.
Alex Behring (on the left), 3 g Capital, alongside William Johnson, CEO of Heinz
For Heinz, the business can be the shortcut for faster growth. And for the 3 g, is a business that has the face of Brazilian partners. Is that Heinz can be much better than it is-exactly what interests Lemann, Telles and Sicupira. The company is not a problem, but it grows slowly. And what needs to be done can bring quick gains. "Heinz is very well managed. But they're not long ago in Latin America, and may need help in developing these markets now, "said the analyst Beth Ann Loewy, the broker Sturdivant & Co.
According to reports, the company has grown in the last three years, an average of one digit (in 2012, the high was 8.8% in the recipe). The operating profit rose by 5.7% in 2011 and 11.9% in 2012. One of the points of analysts is that the costs grow at the same speed-have been spending for the past three years, around 21% of revenue on average. Analysts point out that the competitive pressure affects Heinz. Erin Lash, Morning Star consulting, says that the Ore-Ida, products such as French fries, has faced problems stemming from aggressive rivalry and the "lack of interest" of consumers in the products.
In general terms, say analysts, Heinz could be more efficient. There are improvements possible in the retail and distribution in the work to be done with the Group's brands and, especially, a more consistent exploitation of emerging markets.
The expectation is that the 3 g deploy your management model, already known in companies such as AB Inbev and Burger King. The command led by Brazilians must leave for a rationalization of the costs, with internal spending review, implementation of zero-based budgets and policy of meritocracy. In business in which already entered, the 3 g reviewed including the impact of social programs. It is possible that this is reviewed in Heinz. On the subject, the company speaks little, now.
Behring, co-founder of 3 g, said yesterday that it was too early to talk about cost-cutting. The new owners of Heinz does not rule out the idea of using the Heinz as investment arm to buy other companies in the future.
Today, the company does not admit that there will be changes in the management of Heinz, but sources close to the partners, it is only a matter of time. There are some possibilities on the table, say these sources. The main contender for a command function is Behring, who accompanied the entire negotiation process. Another name commented yesterday on the market to command the Heinz is Paul Basilio, ex-CEO of holding ALL of the 3 g. Source close to the company says the company is "well played", and the acquisition was closed very quickly, it has not yet been possible to make a detailed analysis of the current command.
Publicly, Johnson, CEO of Heinz, desconversa. "I'm too young to retire," said yesterday, and then amended: "I hope to continue doing something". He has 64 years.
Buffett and 3 g have history of investing in the consumer sector. Berkshire, for example, owns a slice of almost 9% in The Coca-Cola Company, along with a participation of over 2% in Procter Gamble and 1.4% & at Walmart.