H.J. Heinz ripe for the picking

Jan. 29, 2010

When Gene Marcial wrote about H.J. Heinz in BusinessWeek's Oct. 12, 2009 issue, he tagged it as a potential takeover target, then trading at $39 a share. The stock has since leaped to $42, and may well continue to rise, he writes in Daily Finance. He reasons that "after Cadbury agreed on Jan. 5 to be acquired by Kraft, ketchup and baby-food maker Heinz now stands out as one of the few major independent food companies -- and in so many ways ripe for the picking." And the most logical acquirer would be Switzerland's Nestle.

"The Kraft-Cadbury buyout deal makes a Nestle-Heinz combination all the more likely," says Mark Boyar, president of Boyar Asset Management, which has accumulated shares. At the same time that the Kraft-Cadbury deal was being finalized, Nestle on Jan. 5 agreed to buy Kraft's frozen pizza business (DiGiorno, Tomsbtone and California Pizza Kitchen). Boyer believes the buyout value of Heinz is worth about twice what the stock is currently trading, or about $80 a share. 

Nestle's desire to increase its presence in frozen food makes Heinz, with frozen brands such as Smart Ones, Ore Ida and Boston Market, the perfect target. Also Heinz's fast growing infant nutrition business is an ideal fit.  

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