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In one of his biggest deals, US investor Warren Buffett has bagged one of New Zealand’s biggest food brands.
His Berkshire Hathaway company and Brazilian private equity firm 3G have offered $US23 billion for H J Heinz, owner of Heinz Wattie’s in Australasia.
In New Zealand, Heinz has an annual turnover of around $730 million, making it the country's ninth largest food company by revenue, according to Food Industry Week.
As part of the deal, which has been unanimously approved by the Heinz board, shareholders will receive $72.50 in cash for each share, a 20% premium to Wednesday's close on the New York Stock Exchange.
H J Heinz is one of the world’s leading packaged-foods companies. It is famous for its ketchup brand, first made in 1876.
In 1992 it bought the Wattie’s part of the then Goodman Fielder Wattie for $565 million in a deal that brought together companies with roughly the same range of canned and other foods, from baked beans to sauces and baby food, though Wattie's was also a leader in frozen food.
Heinz is also in the news for threatening to sue Australian entrepreneur Dick Smith over claims he has made about New Zealand beetroot.
Heinz says the labelling on Smith's Australian grown beetroot is wrong and libelous. It says: ''When American-owned Heinz decided to move its beetroot processing facility from Australia to New Zealand causing hundreds of lost jobs, we decided enough is enough. So we are fighting back against poor quality imported product.''
Heinz closed its two Golden Circle factories in Brisbane and Melbourne and shifted its vegetable canning business to Hawke’s Bay, the original home of Wattie’s, in 2011.
Buffett’s new partner
Mr Buffett usually acts alone in his takeovers but in this case he is handing the operation over to 3G to run.
In 2010, 3G bought Burger King in a $US4 billion deal. "It's their baby from an operational standpoint," he says.
The deal, which requires the approval of Heinz shareholders and the blessing of regulators, will be financed through a combination of cash, rollover of existing debt and debt financing.
It is one of the largest ever in the food industry, whose last big acquisition was in 2000 when Unilever bought Bestfoods for $US23.2 billion.
3G’s co-founder, Jorge Paulo Lemann, has a reputation for hard-headed management with a zero-based budgeting policy - an approach to financial management where all departments start the annual planning process with a budget of zero, rather than a baseline of the previous year’s number. They then have to fight for every single dollar above zero, rather than battle over increases or decreases from the last year.
Zero-based budgeting is something a lot of firms could benefit from adopting, entrepreneur Lance Wiggs told NBR.
He masterminded the global expansion of Brazilian brewer AmBev through a merger with Belgium’s Interbrew, owner of Stella Artois, to form InBev , which later joined up with Anheuser-Busch to become AB InBev, the world’s largest.