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Case
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Reference no. K5-413-757
Prize winner
Published by:
Kellogg School of Management (2019)
Version:
25 April 2019
Revision date:
17-Sep-2019
Length:
25 pages
Data source:
Published sources

Abstract

During December 2012, Jorge Paulo Lemann, a co-founder and partner at 3G, proposed to Warren Buffett that 3G and Berkshire Hathaway acquire H J Heinz Company. Lemann and Buffett, who had known each other for years, jointly decided that the Heinz turnaround had been successful and that there was significant potential for continued global growth. 3G informed Heinz CEO William Johnson that it and Berkshire Hathaway were interested in jointly acquiring his company. Johnson then presented the investors' offer of US70.00 per share of outstanding common stock to the Heinz board. After much discussion, the Heinz board and its advisors informed 3G that without better financial terms they would not continue to discuss the possibility of an acquisition. Two days later, 3G and Berkshire Hathaway returned with a revised proposal of US72.50 per share, for a total transaction value of US28 billion (including Heinz's outstanding debt). Following a forty-day 'go-shop' period, Heinz, 3G, and Berkshire Hathaway agreed to sign the deal. But was this, in fact, a fair deal? And what might be the future consequences for shareholders, management, employees, and citizens of Pittsburgh, the location of the company's headquarters? Last, what was the role of activist investors in bringing Heinz to this deal stage?

Teaching and learning

This item is suitable for postgraduate courses.

Topics

Finance; Cash flow analysis; Corporate governance; Financial analysis; Financial statements; Financial strategy; Mergers & acquisitions (M&A); Private equity; Shareholder value added; Valuation

Setting

The events covered by this item took place in 2012.

Geographical setting

Region:
Americas
Country:
United States

Featured company

Company name:
Heinz
Industry:
Food

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Awards, prizes & competitions

2019 - The Case Centre Awards - Category winner

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