The shares of HJ Heinz (NYSE: HNZ) rallied $12, or 20%, to $72.50 during early New York trade today after the food group revealed an agreed bid involving Warren Buffett.
Heinz said Buffett's investment vehicle, Berkshire Hathaway (NYSE: BRK-A.US) (NYSE: BRK-B.US), and investment firm 3G Capital would combine to pay shareholders $72.50 in cash for each share.
Heinz said the bid represented a 19% premium to its all-time high share price and a 30% premium to its one-year average share price. Including debt, the offer values Heinz at $28bn.
William R. Johnson, the chairman and chief executive of Heinz, said:
"The Heinz brand is one of the most respected brands in the global food industry and this historic transaction provides tremendous value to Heinz shareholders."
"With Heinz stock recently at an all-time high and 30 consecutive quarters of organic topline growth, Heinz is being acquired from a position of strength."
Warren Buffett added:
"Heinz has strong, sustainable growth potential based on high quality standards, continuous innovation, excellent management and great tasting products. Their 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."
The initial press release announcement did not disclose how much Berkshire Hathaway and 3G Capital would each contribute to the deal.
Prior to today, Wall Street experts had expected Heinz to produce current-year earnings of $3.53 per share, indicating a buyout valuation of about 20 times possible profits.
In addition, Heinz's $0.52 per share quarterly dividend suggests Buffett and 3G Capital may collect a 2.9% income.
While some Buffett-type investors may have missed an opportunity with Heinz, there is another stock that the billionaire investor current fancies and remains priced at a level similar to that seen when he last bought.
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