H.J. Heinz (UNKNOWN:HNZ.DL) announced this morning that it has agreed to be acquired by an investment consortium consisting of Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B) and privately held 3G Capital. The deal, unanimously approved by the Heinz board of directors, values the global food industry leader at $28 billion, including the assumption of Heinz's outstanding debt.
The offer of $72.50 per share of stock represents a 20% premium above Heinz's closing price on Feb. 13 and a 19% premium to Heinz’s all-time high share price. The company reports that it also works out to a 23% premium to the 90-day average Heinz share price and a 30% premium to the one-year average share price.
"It's our kind of company," Berkshire's Warren Buffett said in an interview on CNBC, noting its signature ketchup has been around for more than a century. "I've sampled it many times." In addition to its ketchup, Heinz makes Classico spaghetti sauces, Ore-Ida potatoes, and Smart Ones frozen meals.
The deal will be financed by a combination of cash, assumption of existing Heinz debt, and debt financing from JP Morgan and Wells Fargo.
Buffett said on CNBC that Berkshire is putting $12 billion to $13 billion into the deal. But he noted that Berkshire will still have room to make more acquisitions, noting that its businesses continually replenish its cash supply.
"Anytime we see a deal is attractive and it's our kind of business and we've got the money, I'm ready to go," Buffett said.
According to Heinz CEO William Johnson, "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." Buffett was quoted in the press release as saying, "Their [Heinz] global success is a testament to the power of investing behind strong brand equities and the strength of their management team and processes. We are very pleased to be a part of this partnership."
Given the saturated North American market, Heinz has increasingly looked to emerging markets for growth. In its last quarter, the company said emerging markets made up 23% of sales. Berkshire Hathaway and 3G Capital said they will keep Heinz's global headquarters in Pittsburgh and pledge to "fulfill and continue [Heinz's] philanthropic support of community initiatives and related investments."
The transaction is subject to approval by Heinz shareholders and regulatory agencies, and is expected to close by the third quarter of 2013.
-- Material from The Associated Press was used in this report.
Fool contributor Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends H.J. Heinz Company and Wells Fargo. The Motley Fool owns shares of JPMorgan Chase & Co. and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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