Food makers see modest gains from Heinz deal

Buffet buying Heinz at a premium, other food makers see modest gains

Associated Press

The news that billionaire investor Warren Buffett has struck a $23.3 billion deal to buy H.J. Heinz Co. is making the stock of some other food maker's stock look a little bit more tasty Thursday.

It is the largest deal ever in the food industry, according to data provider Dealogic. Heinz CEO William Johnson said the company will be able grow further as a private enterprise.

Buffett's Berkshire Hathaway and its partner in the deal, 3G Capital, will pay Heinz shareholders $72.50 in cash for each share of common stock they own. The transaction value includes the assumption of Heinz's debt. That represents a 20 percent premium to Heinz's closing price of $60.48 on Wednesday.

Shares of Heinz, which makes Classico spaghetti sauces, Ore-Ida potatoes and its namesake ketchup, soared nearly 20 percent to $72.39 in afternoon trading Thursday.

The deal suggests that investors may look more closely at opportunities for other food companies.

Campbell Soup Co.'s shares gained 83 cents, more than 2 percent, to $39.01 on the news that Heinz is worth a hefty premium. Shares of General Mills Inc., which makes foods such as Cheerios and Hamburger Helper, increased 3 percent to $44.29, a new annual trading high for the company. And shares of Kellogg Co. touched a 52-week high of $59.72.

Generally, Buffett prefers to buy entire companies for his Berkshire Hathaway conglomerate and then allow the businesses to continue operating much the way they were before. He told CNBC that Heinz, with its signature ketchup that has been around for more than a century, is "our kind of company".

Heinz is known best for its namesake condiments but given the saturated North American market, has been focused on its business overseas for growth in the prior years. It had revenue of roughly $11.6 billion last year, with ketchup and sauces accounting for just under half of that.

The deal is expected to close in the third quarter.

View Comments (0)