I read that Warren has been tracking this co. since 1980. See you just can't buy this kind of experience. I am sure it was a shrewd buy and now another income stream also he has enough cash leftover to buy another big company and the money keeps piling up with all the dividends being collected, it is like a snowball effect , it keeps getting bigger as it rolls down the hill.
It was actually the head of 3G that had approached Mr. Buffett about the Heinz acquisition. He indicated that the deal would not have happened otherwise.
Personally, I was hoping the "big elephant" was General Mills... just a tad more money at the time, but a bunch of very good brands.
While I am quite sure that GIS will now not be part of Berkshire, it is worth noting that this deal really only makes good sense for 3G if they find significant growth. Heinz is making about 1 billion dollars per year (give or take ~100 million). Out of that, they are going to pay Berkshire 720 million dollars on the preferreds, leaving about 280 million. Then they have the debts on the bonds that look like they are going to be in the low 4% range (I love how Berkshire is offering to sell bond insurance to any bond buyers on the bonds that are being issued by the holding company half owned by Berkshire... looking to make every nickle we can)... and suddenly, there is not a lot of money left. The money that is left, they only own half of it. Nowhere near a reasonable return on the 4.12 billion dollars that the 3G partners are putting up for their 50% of common equity.
They will have to cut costs aggressively (a reason for Berkshire to want 3G to be the 'managing partner', so BRK does not have to be involved in that part), expand internationally... and then, there will be more acquisitions. Heinz under 3G and Berkshire will be able to bring considerable distribution and scale on a global scale. While acquiring something like GIS is likely out... and even a company like Con Agra might be a bit too rich for them. There are a couple of smaller food companies that could be of considerable interest: B&G Foods and Pinnacle Foods. Each of these companies are in the 1-2 billion dollar range. They specialize in buying neglected brands from larger companies (B&G foods bought brands such as Cream of Wheat, and Pinnacle bought Duncan Hines and Nalley), and brings out the value.
I respect your sentiment on the growing size of Berkshire. The Rockefellers (of Standard Oil) focused upon a single critical industry, and used it charge 'economic profit' (profits that exceed the normal profit that would be gained in a competitive market). Most of Berkshire's companies compete in competitive markets, but they do have a few monopolies (in addition to owning several utilities, they also have a rail road and pipeline business that would be difficult to replace or avoid using in certain geographies). These are often referred to as 'natural monopolies'--in other words, they are legal because the public interest/economy are better served by having a single provider (we don't want 10 power companies each running their power lines thru our neighborhoods). In this instance, the government regulates the firm (regulates how much can be charged, for example). Mr. Buffett has said on a number of occasions that these businesses SHOULD be regulated... saying that Berkshire deserves a reasonable profit to encourage more investment, but should not have a right to unreasonable profit because it is a public good that does not have good alternatives.
Mr. Rockefeller did not support regulation, as he wanted to exploit the monopoly in one market to destroy any competition in another market to expand the monopoly.... at times even selling below the cost of production. Berkshire does not really have a history of selling things for less than it cost... Berkshire is about making money on each business, venture and transaction.
Sentiment: Strong Buy