Winnipeg Free Press - PRINT EDITION

Buffett adds Heinz to business empire in record-size deal

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NEW YORK -- Billionaire Warren Buffett is dipping into the ketchup business as part of a $23.3-billion deal to buy H.J. Heinz Co., uniting a legend of American investing with a mainstay of grocery store shelves.

It's the largest deal ever in the food industry and is intended to help Heinz accelerate its transformation into a global business. The company, based in Pittsburgh, also makes Classico pasta sauces, Ore-Ida potatoes and Smart Ones frozen meals.

Buffett's Berkshire Hathaway and its partner on the deal -- 3G Capital, the investment firm that bought Burger King in 2010 -- say Heinz will remain headquartered in Pittsburgh.

Heinz CEO William Johnson said at a news conference that taking the company private would give Heinz the flexibility to make decisions more quickly, without the burden of having to report quarterly earnings.

Heinz was founded by Henry John Heinz and his neighbour, L. Clarence Noble, in 1869. Their first product was grated horseradish, bottled in clear glass to showcase its purity. The first ketchup was introduced in 1876; the company says it was the country's first commercial-grade ketchup.

Last year, Heinz had sales of $11.6 billion, with ketchup and sauces accounting for just under half of that. Given the saturated North American market, it has increasingly been looking overseas for growth. In 2010, for example, the company bought Foodstar, which makes Master brand soy sauce and fermented bean curd in China. Heinz expects emerging markets to account for a quarter of the company's sales this year.

At a press conference following the announcement, Johnson said the deal got underway eight weeks ago when managing partners from 3G Capital visited him for lunch. The men were familiar with each other because Heinz is a supplier for Burger King.

"We did not solicit this," Johnson noted. "They came to me."

Buffett said on CNBC that 3G's billionaire co-founder Jorge Lemann approached him about the Heinz deal on a plane they were on in early December.

Johnson stressed that Heinz would remain in Pittsburgh, noting that condition was part of the deal. He said the only changes the city should see as a result would be that Heinz would no longer be listed in the stock pages of newspapers.

As for management changes, including his own tenure, Johnson said there hadn't yet been any discussions.

Although 3G Capital has a record of aggressively cutting costs at businesses it acquires, managing partner Alex Behring noted at the press conference that Heinz is different because the business is healthy and has been growing its core sales.

Buffett did not immediately respond to a message from The Associated Press on Thursday. But he has recently said he's been hunting for elephant-sized deals. Buffett said on CNBC that Berkshire had about $47 billion in cash available at the end of last year.

-- The Associated Press

Republished from the Winnipeg Free Press print edition February 15, 2013 B11

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