What does Warren Buffett see in Heinz?
The bargain-hunting investor is buying shares trading at all-time highs.
Heinz, best-known for making ketchup, was hurt when consumers turned to cheaper, private-label packaged foods as the economy began to sour. During the latest quarter, the Pittsburgh company reported that North American consumer product sales rose 0.1% to $795 million while operating income plunged 5.7% to $190 million on higher marketing expenses. CEO William Johnson saw his total compensation drop 8% to $14.4 million in 2012, according to The Associated Press.
Billionaire Nelson Pelz won a seat on the company's board in 2006 following a proxy fight and had been pressuring the company to sell assets to boost its share price. One area where Heinz listened to the activist investor was in making ketchup packets easier to open. The new packet design, unveiled in 2011, was such a hit that The Wall Street Journal reported that some customers were hoarding them.
Heinz's businesses have shown pockets of strength in the food service industry and in emerging markets. They also have iconic brands that Buffett has liked. Heinz Tomato Ketchup was first introduced in 1876. The company also sells Ore-Ida potatoes and Classico pasta sauce.
Evidently, Buffett and 3G Capital like what they see. According to Bloomberg, they are paying about 14.6 times earnings before interest, taxes, depreciation and amortization, well above the 7.6 times multiple paid in similar deals. Shares of other food companies, such as Campbell Soup (CPB), are rising as well.
Buffett has made other bets in consumer products, with holdings in Coca-Cola (KO), Johnson & Johnson (JNJ) and Kraft Foods (KRFT). He helped Mars Inc. in its $28 billion takeover of chewing gum maker Wm. Wrigley Jr.
Based in Brazil, 3G Capital, is no stranger to the food business either and will manage the operations of Heinz when the deal closes. It acquired Burger King (BKW) in 2010 for $3.3 billion and took the fast food chain public last year.
Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
More on moneyNOW
I have enjoyed your site a long time but will switch if this crap continues.
MAYBE WARREN SEES A CHANCE TO HELP A LIBERAL BUDDY, JOHN KERRY. FUNNY HOW THIS CAME ABOUT AFTER HE BECAME SECRETARY OF STATE (SOS!). NOW KERRY IS WORTH MORE THAN 200 MILLION OR WHATEVER THE TRUE AMOUNT. ANOTHER RICH GUY SO CONCERNED ABOUT THE POOR.
MAYBE WARREN WILL GIVE SOME SHARES TO BARRACK ALSO
Hey, just one liberal helping out another.
Keep the wealth in the greedy party.
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
More than 8,000 households got hit with the one-time levy as Socialist President Francois Hollande continues to target the nation's wealthiest.
- Farmers cultivate drones as new high-tech tool
- Apple's overseas hoard unfair to taxpayers
- Why hugely profitable ESPN is laying off workers
- Tornado shelters become a vital business
- Victoria's Secret won't sell cancer 'survivor' bras
- DC is doing nothing to fix the economy
- Models have it easier getting into US than engineers
- Bernie Madoff earns sweatshop wages in prison
- Motor home sales rise in hopeful economic sign
[BRIEFING.COM] Stocks ended modestly higher as the S&P 500 climbed 0.2%, and the Dow added 0.4% to register its 19th consecutive Tuesday of gains.
The major averages saw little change during morning action, but afternoon buying interest helped lift the indices to session highs. Most cyclical sectors (with the exception of materials and technology) finished among the leaders, but the defensively-geared health care sector settled atop the leaderboard as biotechnology outperformed. ... More
More Market News
The auto parts giant beats Wall Street expectations, while continuing to expand its stores in the U.S. and Mexico.