While the UK economy may still be languishing in the doldrums and the Eurozone Crisis grips our continental neighbours in an iron grasp, there are signs that the rest of the world’s economies are slowly managing to recover. The United States has recently witnessed a string of high-profile mergers – something which rarely occurred during the global financial crisis, therefore standing out as the surest sign of international recovery there has been so far.
First of all, American Airlines and US Airways came together in an $11 billion merger to create the world’s largest airline. This was quickly followed by the takeover of Dell by founder Michael Dell for $24 billion and the buyout of UK firm Virgin Media by American counterpart Liberty Global for $23.3 billion.
Now it has emerged that legendary businessman Warren Buffett has teamed up with private equity firm 3G Capital to take over the iconic Heinz brand. His company, Berkshire Hathaway, made history after the announcement, with Class A shares rising 1 per cent to hit a closing high of $149,240 per share.
Altogether, 3G Capital and Berkshire Hathaway will pay $28 billion, or around £18 billion, for the ownership rights to the iconic food company. Berkshire Hathaway will pay between $12 billion and $13 billion in cash, with 3G Capital paying the remaining amount to take the cash settlement to $23 billion. The remaining $5 billion will be in debt.
Mr Buffett’s bid was almost instantly approved by the company’s board, who see the involvement of such a high profile character as a major step forward for the firm. However, the bid must also be approved by shareholders in order for it to go through.
Heinz president, chairman and chief executive William Johnson says; “The Heinz brand is one of the most respected brands in the global foods industry and this historic transaction provides tremendous value to Heinz shareholders.
“We look forward to partnering with Berkshire Hathaway and 3G Capital, both greatly respected investors, in what will be an exciting new chapter in the history of Heinz.”
3G Capital are no strangers to the food and drinks industry, being the owners of fast food chain Burger King. Similarly Mr Buffett’s great experience in investing, which has donned him the nickname “the sage of Omaha”, means that this venture is likely to prove immensely profitable both to the investors and to Heinz.
Heinz is an immensely popular brand both in the UK and abroad, with 650 million bottles of its ketchup sold worldwide every year. In the UK, 1.5 million cans of Heinz baked beans are sold on a daily basis, making it the biggest seller of the product in this country.
As a result, Heinz employment in the UK and Ireland is expansive with around 2,500 employees currently holding positions within the company. Its UK headquarters are based in Hayes, Middlesex, and it occupies a number of industrial properties throughout the country.
Unite has approached Heinz for a meeting to ensure the safety of these 2,500 plus jobs, concerned that the change in ownership will usher in a radical shift in the company’s business model.
3G Capital co-founder, Alex Behring, assured employees that the international headquarters would remain in Pittsburgh, but declined to discuss other aspects of business. Instead, he claimed it was too early to delve into the matter of potential cost-cutting techniques.
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