Shares of H.J. Heinz (NYSE:HNZ) jumped Thursday after the company announced it will be acquired by Warren Buffett's Berkshire Hathaway and 3G Capital in a $28 billion deal, including the assumption of debt.
Heinz shareholders will get $72.50 in cash for each common share they own, representing a 20% premium to the consumer product company's closing share price of $60.48 on Wednesday.
Shares of the company rose 20% to $72.51 this morning.
“The Heinz brand is one of the most respected brands in the global food industry and this historic transaction provides tremendous value to Heinz shareholders,” said chairman, president and CEO, William R. Johnson.
“With Heinz stock recently at an all-time high and 30 consecutive quarters of organic topline growth, Heinz is being acquired from a position of strength."
The deal, which is expected to close in the third quarter of this year, will be financed through a combination of cash provided by Berkshire and 3G, as well as through the rollover of existing debt and debt financing committed by J.P Morgan and Wells Fargo.
The buyout still needs the approval of Heinz shareholders, as well as necessary regulatory approvals.
"Heinz has strong, sustainable growth potential based on high quality standards, continuous innovation, excellent management and great tasting products," said Buffett, who is well known as a value investor and had indicated in recent months that he was eager to do another deal.
"Their global success is a testament to the power of investing behind strong brand equities and the strength of their management team and processes. We are very pleased to be a part of this partnership.”
Alex Behring, managing partner of 3G, a global investment firm that is known for its takeover of Burger King, said that the firm is looking forward to working with Heinz employees and suppliers to support the company's ongoing global growth efforts.
Heinz said that both Berkshire and 3G have promised to maintain Pittsburgh as the company's global headquarters.
In late November, Heinz posted a 22.3% increase in second-quarter earnings, helped by growth in emerging markets, improved margins and a favorable tax rate. Sales edged up 0.5 per cent to $2.83 billion from $2.81 billion in the prior-year period.
The company delivered organic sales growth of 3.3%, led by emerging markets, which posted organic sales growth of 13.2% for the quarter.
In North America, reported sales increased 0.1%, while organic sales increased 0.4%.