Berkshire acquires Heinz for 72.5 p/s

[fareastwarriors]

Tightfisted New Owners Put Heinz on Diet

 

Owners 3G Capital, Warren Buffett Make Deep Cuts in Foods Giant

 

http://online.wsj.com/news/articles/SB10001424052702303743604579352640635188268?mod=WSJ_hp_LEFTTopStories

[fareastwarriors]

Buffett Move Shows Currency Dip Won’t Fix Canadian Plants

 

 

 

http://www.bloomberg.com/news/2014-03-10/buffett-move-shows-currency-dip-won-t-fix-canadian-plants.html

[Kraven]

Book review on "Dream Big", a book about 3G that was just recently translated from Portuguese to English.  Apparently it's now available on Amazon.

 

https://www.santangelsreview.com/2014/04/28/book-review-and-lessons-from-dream-big-a-glimpse-inside-the-strategies-and-tactics-of-3g-capital/

[onyx1]

Book review on "Dream Big", a book about 3G that was just recently translated from Portuguese to English.  Apparently it's now available on Amazon.

 

https://www.santangelsreview.com/2014/04/28/book-review-and-lessons-from-dream-big-a-glimpse-inside-the-strategies-and-tactics-of-3g-capital/

 

    Really enjoyed this one, thanks for the recommendation.  It's not hard to see why WEB loves these guys.  They became some of the world's richest men by creating a dream atmosphere for the any PSDs (poor, smart, and a deep desire to be rich) and a nightmare for any underperforming senior executive.  At one point, 10% of their bank's workforce was removed every year due to underperformance and it wasn't uncommon for them to appoint as CEO in one of their companies an employee who was a mere seven years out of school.  By setting up a salary plus incentive bonus compensation structure to reward only results, they made multi-millionaires out of hundreds (thousands?) of employees many of who were under the age of 40.

 

Reminds me of this:

 

https://www.youtube.com/watch?v=UtDIijmFbqw

 

 

 

 

 

 

 

[Liberty]

Book review on "Dream Big", a book about 3G that was just recently translated from Portuguese to English.  Apparently it's now available on Amazon.

 

https://www.santangelsreview.com/2014/04/28/book-review-and-lessons-from-dream-big-a-glimpse-inside-the-strategies-and-tactics-of-3g-capital/

 

I'm definitely ordering this one, thanks for putting it on my radar.

[xo 1]

Interesting interview with the author of Dream Big in The New York Times.

 

http://dealbook.nytimes.com/2014/05/05/a-q-a-with-the-author-of-a-buffett-praised-book-on-3g-capital/?_php=true&_type=blogs&emc=edit_dlbkpm_20140505&nl=business&nlid=64662544&_r=0

 

It hadn't struck me until reading the interview that one of the more important aspects of the BRK relationship with 3G might be to expand the geographic footprint of the BRK's deal.  As Warren remarked at the annual meeting, the phone isn't ringing from outside the United States.  With their brewery work, they strike me as having a much broader world view and, more important, a substantial set of contacts.

[Grenville]

Interesting interview with the author of Dream Big in The New York Times.

 

http://dealbook.nytimes.com/2014/05/05/a-q-a-with-the-author-of-a-buffett-praised-book-on-3g-capital/?_php=true&_type=blogs&emc=edit_dlbkpm_20140505&nl=business&nlid=64662544&_r=0

 

It hadn't struck me until reading the interview that one of the more important aspects of the BRK relationship with 3G might be to expand the geographic footprint of the BRK's deal.  As Warren remarked at the annual meeting, the phone isn't ringing from outside the United States.  With their brewery work, they strike me as having a much broader world view and, more important, a substantial set of contacts.

 

Nice little interview. I didn't realize Warren recommended the book during the AGM!

[VersaillesinNY]

View From The Top: Carlos Brito, CEO, Anheuser-Busch InBev

 

Stanford Graduate School of Business Dec 2, 2013

 

 

It's not about me and my ego — it's about the company building something that's bigger than us, that is going to be here for hundreds of years. Carlos Brito

 

[VersaillesinNY]

Beer Fight: AB InBev vs. Guatemala's Brewing Dynasty

 

http://www.businessweek.com/articles/2014-05-08/beer-fight-ab-inbev-vs-dot-guatemalas-brewing-dynasty#p1

[Liberty]

http://brooklyninvestor.blogspot.ca/2014/07/heinz-update-whos-next.html

 

HNZ averaged an operating margin of 14.9% for six years.  And then comes 3G and boosts that to 21.5% in less than a year.  In a single year, they took out 7.1% of revenues in costs;  4.4% out of SGA and 2.7% from COGS.

 

They increased operating earnings +47% in less than a year.

[JBird]

http://brooklyninvestor.blogspot.ca/2014/07/heinz-update-whos-next.html

 

HNZ averaged an operating margin of 14.9% for six years.  And then comes 3G and boosts that to 21.5% in less than a year.  In a single year, they took out 7.1% of revenues in costs;  4.4% out of SGA and 2.7% from COGS.

 

They increased operating earnings +47% in less than a year.

 

Boom! As always, thanks for posting.

[peter1234]

Incredible. Another one of Buffett's 'expensive' acquisitions (after BNSF) that looks much cheaper in hindsight.

;)

 

 

The EPS and EBITDA estimates for the year ending April 2013 and 2014 and respective valuations at the time (at $72.50/share) were:

 

                          EPS      P/E        EBITDA                EV/EBITDA

April 2013e          $3.58    20.3x    $2,057 million        13.6x

April 2014e          $3.78    19.2x    $2,195 million        12.8x

[VersaillesinNY]

Burger King Is Run by Children

 

http://www.businessweek.com/articles/2014-07-24/burger-kings-ceo-daniel-schwartz-is-33-years-old#p1

[PatientCheetah]

Burger King Is Run by Children

 

http://www.businessweek.com/articles/2014-07-24/burger-kings-ceo-daniel-schwartz-is-33-years-old#p1

 

You can say the same about John Malone/Druckenmiller/most of outsider CEOs etc. Talented and hard working young people often have fresh pairs of eyes. Especially in tech/retail, I would be worried if the top guy is over 50.

[gfp]

Heinz 10Q out -

 

http://www.sec.gov/Archives/edgar/data/1600508/000160050814000013/hnz10q92814.htm

[treasurehunt]

Heinz 10Q out -

 

http://www.sec.gov/Archives/edgar/data/1600508/000160050814000013/hnz10q92814.htm

 

From the 10Q, I see that Heinz had pre-tax income of about 214 million in the 3rd quarter. Expenses included about 138 million of "one-time" items (severance, restructuring charges, asset write-offs etc). If we take out these expenses, pre-tax income was about 352 million. The income tax rate was about 18.7 percent this quarter. I don't know if this is close to their long-term rate, but let's assume a 20% tax rate. Then after-tax income amounts to about 282 million. After paying Buffett 180 million in preferred dividends, that is still 100 million in quarterly earnings that belong to common equity. Since 3G paid 4.25 billion for their 50% share of Heinz common, it looks like they are getting an annual return of about 4.7% on their money at the moment. I think this is pretty impressive progress in just a year or so. I am sure 3G will be wringing out more costs as time goes by.

 

I am not sure how happy the employees are, but the numbers look good. :-)

[Guest longinvestor]

Heinz 10Q out -

 

http://www.sec.gov/Archives/edgar/data/1600508/000160050814000013/hnz10q92814.htm

 

I am sure 3G will be wringing out more costs as time goes by.

 

I am not sure how happy the employees are, but the numbers look good. :-)

 

At the BRK meeting in May, Munger defended 3G's war on excessive cost @Heinz. Specifically, layers of management. It appears KO finds itself similarly situated. "Hiding behind brands"?

[xo 1]

I like the turn of phrase "Hiding behind brands."  Did you mean that the brands had their own management layers, where management across brands would permit a decrease in managers?  Thanks.  18 months later, I am still fascinated by this deal.

[snailslug]

http://www.wsj.com/articles/kraft-in-talks-to-be-acquired-by-3g-capital-1427238184

 

Kraft in Talks to be Acquired by 3G Capital / Heinz

[valueyoda]

Warren can sign a big check to fund this deal, since Heinz's balance sheet is already quite extended.

[Mephistopheles]

http://www.wsj.com/articles/kraft-in-talks-to-be-acquired-by-3g-capital-1427238184

 

Kraft in Talks to be Acquired by 3G Capital / Heinz

 

Does Kraft own Cadbury? Or is that under Mondelez? This is ironic given that Buffett criticized the Cadbury acquisition and the simultaneous sale of the pizza business, a few years ago, and ended up selling his shares. Now he will own probably a 50% stake lol.

[petec]

http://www.wsj.com/articles/kraft-in-talks-to-be-acquired-by-3g-capital-1427238184

 

Kraft in Talks to be Acquired by 3G Capital / Heinz

 

Does Kraft own Cadbury? Or is that under Mondelez? This is ironic given that Buffett criticized the Cadbury acquisition and the simultaneous sale of the pizza business, a few years ago, and ended up selling his shares. Now he will own probably a 50% stake lol.

 

Yes, but in a company that is much better managed under Lehman and doesn't misallocated capital :)

[cubsfan]

Mondelez owns Cadbury

[Charlie]

http://finance.yahoo.com/news/hj-heinz-buying-kraft-deal-101457061.html

 

http://finance.yahoo.com/news/kraft-foods-merge-ketchup-maker-100954632.html

 

 

Cheers!  :)

[Phaceliacapital]

Looks like a fair deal, curious to see financing details.

 

As kraft shareholder you get a 25% dividend + 49% of a company with mcap probably around 60 mn (assuming no net debt change + 10x EBITDA)?

 

So 10 mn + 30 mn = 40 mn, + 3G & Buffett as long term partners. Not too shabby