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James Thomson is the editor of BRW. Previously he was editor and publisher of SmartCompany and a senior editor at Business Spectator. He writes regularly on Australia's wealthiest entrepreneurs and has deep expertise in small business and the mid market.

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Big beans: Warren Buffett aims the elephant gun at Heinz in $US28bn deal

Published 15 February 2013 10:47, Updated 18 February 2013 07:20

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Big beans: Warren Buffett aims the elephant gun at Heinz in $US28bn deal

Elephant hunting ... Warren Buffet says he’s ready for more big deals Photo: Bloomberg

Berkshire Hathaway chairman and global investment icon Warren Buffett often talks about how his elephant gun – that is, the $US47 billon pile of cash that the company has as its disposal – is always ready to take down more prey.

And this morning, he’s landed some big game in the form of 150-year-old food manufacturing icon Heinz.

Buffett has teamed up with Brazilian investor Jorge Paulo Lemann and his company 3G Capital in a $US28 billion deal.

Berkshire will stump up around $US13 billion in cash, but 3G – which has done similar deals with Burger King and brewer Anheuser-Busch.

“3G are out partner, but it’s their baby from an operational standpoint,” he told CNBC

“I have known Jorge Paulo Lemann ever since we were on the Gillette board together for a dozen or so years and I have admired him as a businessman enormously and as a human being.

“So it’s a great partnership for us and any kind of partnership where I don’t have to do the work is my kind of partnership.”

Any kind of partnership where I don’t have to do the work is my kind of partnership.

Questions are already being raised about the price Buffett has paid, a massive 20 times earnings. But the Oracle of Omaha says that while he always has to be “dragged to the altar” to pay a premium, Heinz is worth it.

“It’s our kind of company. It’s got fantastic brands led by ketchup. You know, the company started in 1869 with horseradish, but they quickly shifted into ketchup. So the ketchup brand has been around for 135 years or so. And I’ve sampled it many, many times.”

The line highlights why this is a very Buffett deal – an iconic company with strong brands, strong competitive advantages and solid financial results.

And perhaps most importantly, a company so big that only a few people could realistically pull of such a big takeover deal.

That’s another reason Buffett may have been willing to pay what appears to be a big premium – with deals of this size, he’s probably prepared to do that to ensure there is no bidding war and no leaking of the details of the deal.

Of course, Buffett’s elephant gun still has plenty of bullets, with more than $US30 billon of cash at his disposal.

“I’m ready for another elephant. If you see any walking by, please, call me.”

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