Warren Buffett's Berkshire Hathaway and Brazilian private equity firm 3G Capital will buy ketchup maker H.J. Heinz Company for $23.2 billion in cash, Reuters reported on Thursday.
Berkshire and 3G will reportedly pay $72.50 per share, a 19 percent premium to the stock's previous all-time high. Buffett said he has no intention of raising his bid and the stock fell back below that mark by midday. Both companies indicated that the deal could be the first step in a broader wave of mergers for the food and beverage industry.
"Maybe for the consumer staples group in general this may start some talk about consolidation," Edward Jones analyst Jack Russo said, and reported by Reuters. "Even corporate entities are flush with cash, interest rates are low, it would seemingly make sense."
The Heinz company generates the largest portion of its sales in Europe, though its traditional North American consumer products business is the most profitable. Its real growth engine has been through the Asia/Pacific region, where sales increased nearly 11 percent in the last fiscal year, according a demand for sauces and infant foods in China.
The surprise purchase satisfies Buffett's hunt for growth through acquisition. Reports say he "was frustrated in 2012 by the collapse of at least two unnamed deals in excess of $20 billion and said he might have to do a $30 billion deal this year to help fuel Berkshire's growth engine."
