Generally known as a complementary player, ketchup took center stage Thursday with the announcement that Berkshire Hathaway and 3G Capital have agreed to acquire H.J. Heinz Company, maker of the ubiquitous condiment brand, in a deal worth $28 billion, including the assumption of debt.
Berkshire, billionaire investor Warren Buffett’s investment vehicle, is being advised on the transaction by longtime outside counsel Munger, Tolles & Olson, while Kirkland & Ellis is handling the deal for Brazilian-backed investment firm 3G. For its part, Heinz has turned to Davis Polk & Wardwell as outside counsel. Wachtell, Lipton, Rosen & Katz is advising a special committee of the company’s board.
For Buffett, the deal provides a taste of the big game he has been hunting since announcing in 2011 that he had reloaded his "elephant gun" in a bid to make a major acquisition. And Heinz, which now joins such other iconic American brands as Dairy Queen and Fruit of the Loom in Buffett’s portfolio, may not be the last target Buffett has in his sights. The billionaire said Thursday that he has plenty of capital and is already looking forward to striking his next big deal.
3G, which reportedly pitched the idea of scooping up Heinz to Berkshire roughly two months ago, would be the main overseer of the target company’s operations upon completion of the deal, according to The New York Times. 3G also owns a majority stake in Burger King.
In acquiring Heinz, Berkshire and 3G are adding more than just a dollop of ketchup to their investment plates. The company’s product offerings include canned beans, Heinz 57 steak sauce, Classico pasta sauces, and a host of other condiments. The company also owns the Ore-Ida frozen potato products brand and Lea & Perrins Worcestershire sauce.
Under the terms of the agreement, Berkshire and 3G will pay $72.50 in cash for each share of Pittsburgh-based Heinz, a price that represents a 20 percent premium over the company’s Wednesday closing price. Buffett and 3G are paying that healthy premium only weeks after Heinz hit its all-time high stock price of $60.96. The Times also reports that Berkshire and 3G will contribute roughly $4 billion apiece to the deal, with Berkshire pitching in another $8 billion for Heinz’s preferred shares and the remainder of the price coming in the form of debt financing provided by J.P. Morgan and Wells Fargo.
The deal is expected to close in the third quarter of this year, pending approval by regulators and Heinz shareholders.
Munger Tolles has served as Berkshire’s go-to outside counsel on countless past transactions. Founding firm partner Charles Munger joined the investment firm in 1965 and, as The Am Law Daily has previously reported, become one of Buffett’s most trusted advisers. (Munger now serves as Berkshire’s vice-chairman.) In November the firm advised Berkshire on its purchase of catalog-based crafts and party supplies company Oriental Trading Company in a deal worth roughly $500 million. Two years ago, Munger Tolles steered Berkshire’s $9 billion purchase of chemicals company The Lubrizol Corporation.
The firm is fielding a Los Angeles–based team for the Heinz deal that includes M&A partners Robert Denham and Mary Ann Todd, corporate finance partner Judith Kitano, tax partner Stephen Rose, corporate governance partner Brett Rodda, and corporate associate Sarah Graham.
Kirkland is advising 3G less than three years after representing the investor on the $4 billion deal that took Burger King private in 2010. New York–based corporate M&A partners Stephen Fraidin, William Sorabella, and David Feirstein are advising 3G on the Heinz purchase, along with debt finance partner Jay Ptashek, capital markets partners Joshua Korff and Michael Kim, and corporate partners Christopher Torrente and Daniel Michaels. Executive compensation partner Scott Price, private funds partner Andrew Wright, competition partner Mark Kovner, litigation partner Peter Doyle, and tax partners Greer Phillips and Steven Clemens are also working on the matter. The Kirkland associates working on the deal are Richard Brand, Adele Maloney Thomas, Brandon Charnas, Nick Schwartz, and Suzi Sabogal.
The New York–based Davis Polk team advising Heinz includes partners Arthur Golden, John Bick, and Michael Davis, as well as associate Lee Hochbaum. Employee benefits partner Kyoko Takahashi Lin, tax partner Kathleen Ferrell, and antitrust partner Ronan Harty are also advising. Partners James Florack and Michael Kaplan are providing finance advice, along with associate Sophia Hudson. Ted Bobby serves as general counsel for Heinz.
Bick previously led a Davis Polk team that advised Heinz on its $165 million purchase of Foodstar from Transpac Industrial Holdings in 2010.
The Heinz deal caps a busy week for Davis Polk, which also advised Comcast on its $16.7 billion purchase of the remaining 49 percent stake in NBCUniversal it did not already own, on Tuesday. (In a related deal, Comcast paid an additional $1.4 billion for NBC’s Manhattan headquarters at 30 Rockefeller Center, as well as other studios and offices.)
Wachtell corporate partners Edward Herlihy and David Shapiro are advising a transaction committee composed of members of the Heinz board.
Sullivan & Cromwell M&A partners Frank Aquila and Brian Hamilton, along with associate Marshall Yuan, are representing Centerview Partners as financial adviser to Heinz on the sale. Heinz’s other financial adviser, BofA Merrill Lynch, is represented by Willkie Farr & Gallagher corporate partners Steven Seidman and Laura Delanoy.