Warren Buffett, the billionaire from the US, has just revealed that his company Berkshire Hathaway will be taking over buy H.J. Heinz Co. for an estimated $23.3 billion. It’s a huge deal – in fact, the richest deal in the food industry ever. For this money, Buffet will be able to grab hold of one of the most well-known brands and among the oldest brands too in the country.
It is good for the presence of Heinz as well. It is already extremely visible in the US. And now with this takeover, the company will be able to go ahead with its expansion plans of reaching out to other parts of the world. This company best known for its ketchups, is also planning to promote their vinegar, pasta sauces, pickles, Ore-Ida potatoes and baked beans. And Heinz wants to customize the products for specific taste-buds across the world as well.
To take over Heinz, Buffet’s Berkshire has teamed up with 3G Capital. Interestingly, there has been speculation for quite a while now about takeover bids for Heinz. It seems that finally one deal has come through. 3G Capital was interested because they are already in the food space. The company acquired Burger King sometime back, and now with this deal, 3G Capital will be able to strengthen their presence in the food domain.
This move has been seen positively by the market. Stock prices of Heinz went up in New York by an impressive 20%. The stock prices of Berkshire Hathaway also went up by 1% to reach a record closing high of $149,240 for each share. However it must be remembered here that the company shareholders of Berkshire must still approve the deal. For now, only the board has approved it. The stock owners are of course not likely to oppose it.
How It All Started
Interestingly, it all started when Warren Buffett was traveling in a plane with Jorge Lemann, the co-founder of 3G Capital. The two know each other very well because they have been in the board of Gillette together. Buffet revealed to CNBC that Jorge had made an offer that together they should make a bid for Heinz. A lunch meeting was organized with William Johnson, the CEO of Heinz soon. It was a too good offer for Johnson to decline. He took it to the board, which approved the deal. The details of the deal were then worked out over time.
Heinz is going to focus more on the emerging markets going forward. The estimates are that, a quarter of the company’s earnings will come from these markets in the near future. With the middle-class customer base in many of these markets growing, Heinz certainly sees a potential here. Plus, it wants to retain its market reach in the US market too by constantly innovating and bringing out new products.