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Buffett's firm buying Heinz in $23B deal

H.J. Heinz Co. has agreed to be acquired

H.J. Heinz Co. has agreed to be acquired by an investment group including billionaire investor Warren Buffett in a deal valued at $23.3 billion. Among its best-known products is ketchup. Credit: AP, 2011

Billionaire Warren Buffett is dipping into the ketchup business as part of a $23.3-billion deal announced Thursday 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 chief executive 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 neighbor L. Clarence Noble in 1869. Their first product was grated horseradish, bottled in a 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. Heinz expects emerging markets to account for a quarter of the company's sales this year.

Buffett has recently said that he's been hunting for elephant-sized deals. He said on CNBC that Berkshire had about $47 billion in cash available at the end of last year.

Heinz's brands have power with shoppers that takes years to create, and it has been able to raise prices even in the highly competitive grocery business, said Brian Sozzi, chief equities analyst for NBG Productions. "There isn't going to be another Heinz brand," he said. "It has a durable competitive advantage."

Heinz shareholders will receive $72.50 in cash for each share

The per-share price for the deal represents a 20 percent premium to Heinz's closing price of $60.48 on Wednesday.

Buffett said on CNBC that Berkshire is putting $12 billion to $13 billion into the deal.

"It's our kind of company," Buffett said in the interview, noting its signature ketchup has been around for more than a century. "I've sampled it many times."

Shares of Heinz closed up 19.87 percent at $72.50.

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