Around middle of February this year came the announcement that the Brazilian private firm 3G Capital & Berkshire Hathaway (BRK) have come together to buy the 144 year old iconic H.J. Heinz Co.
“Including debt assumption, Heinz valued the transaction, which it called the largest in its industry’s history, at $28 billion. Buffet’s Berkshire Hathaway and 3G will pay $72.50 per share, a 19 percent premium to the stock’s previous all-time high,” reported Reuters.
Analyzing the transaction Fitch Ratings had to say this:
“First, it is unusual for BRK to pair with a private equity firm to make an acquisition, mostly because BRK’s sizable resources mean few deals would be too large to go alone. In fact, Warren Buffett still claims to be in the market for another large acquisition.
Second, Mr. Buffett’s reputation has long been, and is, as a value investor in search of undervalued assets. One could argue the sizable premium above Heinz’s record high stock price simply does not qualify this as a “value” investment.
Last, and perhaps most importantly, teaming with 3G Capital to acquire Heinz could complicate any exit strategy. BRK has historically been a long-term investor, while private equity firms typically have a shorter term investment horizon.”
Did the deal deviate from Mr. Buffet’s playbook on the value front?
GR Advisory & Training 