By now, you've probably heard of the acquisition of H.J. Heinz Co. But for all the warmth associated with Warren Buffett, people in the financial world and those living in Pittsburgh or working for Heinz are surfing the Internet for insight into 3G Capital. The Brazilian/New York investment firm may have more impact – and not all of it positive – on the ketchup company than Buffett's Berkshire Hathaway.
On Feb. 14 (ironic, eh?) it was announced Berkshire Hathaway and 3G will pay Heinz shareholders $72.50 in cash for each share of common stock they own, a 20 percent premium to Heinz's closing price on Feb. 13 and 19 percent more than Heinz's all-time high share price. The deal is valued at $28 billion, which includes assuming some Heinz debt.
I have some personal bias toward Heinz. I grew up in Pittsburgh, an aunt worked in one of the ketchup plants and Heinz was our 2011 Processor of the Year. My visits – to corporate headquarters, the suburban Pittsburgh R&D center and to the Muscatine, Iowa, plant – only deepened my appreciation of this company.
Our selection of Heinz capped a year in which a lot of companies were getting serious about the developing world, and Heinz already was a leader in overseas sales. Two-thirds of its revenue came from outside the U.S., and 20 percent was from developing markets.
(And I was tickled to be able to put Heinz Field, home of my beloved Pittsburgh Steelers, on our December 2011 cover.)
As my hometown newspaper, the Pittsburgh Tribune-Review put it: "Heinz is as important to the Pittsburgh area as Anheuser-Busch is to St. Louis. Four years after 3G Capital's InBev engineered a $52 billion takeover of the nation's largest beer maker in 2008, the brewery employs fewer people, takes longer to pay suppliers and gives less to charities."
While identified in reports as a New York investment firm, 3G is firmly rooted in Brazil. It officially became 3G Capital in 2004 with principals Jorge Paulo Lemann, Carlos Alberto Sicupira, Marcel Hermann Telles and Roberto Thompson Motta. It acquired Burger King in 2010 for $4 billion and helped engineer the growth of InBev including that Belgian firm's acquisition of Anheuser-Busch in 2008.
3G is known for quickly identifying cost savings and just as quickly implementing them. On the other hand, Buffett, the homespun Oracle of Omaha, favors companies blessed with good management that require very little tinkering. So it's kind of an odd pairing, Berkshire Hathaway and 3G, to me at least.
The King of Beers has gotten some tarnish on its crown since its merger with InBev. There have been charges that Anheuser-Busch is watering down its beers – a group of beer drinkers filed a class action suit just this month, but the brewer has vehemently denied that. What they don't deny is that Beck's, that fine German beer, is now brewed in America. All Beck's beer for the U.S. market apparently has been brewed in St. Louis since 2012. The company did not try to hide that fact; in fact, I think they announced it. But that doesn't make it right … or smart.
Even my Heinz visits back in 2011 were bittersweet. When you're 143 years old, as Heinz is, it's hard to keep legacy plants running in your hometown. That's one of the reasons I had to drive out to Muscatine – there are no Heinz manufacturing plants in the Pittsburgh area anymore (although parts of the Muscatine plant date back to 1893). The R&D center, however, was a recent multimillion-dollar investment that confirmed Heinz's commitment to Pittsburgh.
The acquirers have pledged to maintain Pittsburgh as Heinz's global headquarters. I thank them for that.
I understand financial responsibility and the need to evolve. It seemed to me Heinz had managed a pretty good balance. I just hope Berkshire Hathaway and 3G maintain that balance.
This article originally appeared in the March 2013 issue of Food Processing Magazine.