Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



The Mini Elephant: Buffett Buys Heinz

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Warren Buffett's Berkshire Hathaway (NYSE: BRK-B  ) teamed up with Brazilian investor Jorge Paulo Lemann to buy ketchup giant Heinz (UNKNOWN: HNZ.DL  ) . At a 20% premium to yesterday's closing price and easily an all-time high share price, Heinz investors -- including the family of Secretary of State John Kerry -- are getting a great deal.

Berkshire and Lemann's 3G Capital will split Heniz's equity (about $4 billion each, according to Buffett), while Berkshire is putting up more cash in exchange for preferred stock. Berkshire will put up about $13 billion in cash -- a decent chunk of the $47 billion cash it held at the end of September.

On CNBC this morning, Buffett said 3G will handle Heinz's operations. "[3G] is our partner, but it's their baby from an operational standpoint." So even though Heinz is being purchased in its entirety, this deal from Berkshire's point of view is more akin to purchasing a passive stake of common stock in the open market, rather than the whole takeovers Buffett has done in the past, like the purchase of Burlington Northern.

The business is classic Buffett -- a 150-year-old company with an iconic brand and a product Buffett says "he's sampled many times." What's odd is the price. Buffett and Lemann are paying a rich valuation of about 20 times earnings. Asked why he was willing to pay such a premium, Buffett joked: "I'm never willing. They drag me to the alter, always," and proceeded to talk about the strength of Heinz's brands. Time will tell how it plays out.

With a market cap of almost $250 billion, Berkshire needs big deals to move the needle. Buffett calls them "elephant deals."

"I'm ready for another elephant. If you see any walking by, please, call me," he said this morning.

The Fool's resident Berkshire Hathaway expert Joe Magyer has created this premium research report on Berkshire. Claim a copy by clicking here now.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2496530, ~/Articles/ArticleHandler.aspx, 9/29/2016 1:14:21 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,181.25 -157.99 -0.86%
S&P 500 2,149.19 -22.18 -1.02%
NASD 5,267.24 -51.31 -0.96%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/29/2016 12:58 PM
BRK-B $144.15 Down -1.13 -0.78%
Berkshire Hathaway… CAPS Rating: *****
HNZ.DL $72.49 Down +0.00 +0.00%
H.J. Heinz Company CAPS Rating: ****