Warren Buffett wants some ketchup with his soda and ice cream.
The famed investor is teaming up with a Brazilian private equity firm to acquire ketchup giant H.J. Heinz Co.
The $23 billion price tag makes it one of the biggest buyouts in the history of the food industry. Factoring in the assumption of debt, the deal is worth $28 billion.
Buffett's investment firm Berkshire Hathaway Inc. and 3G Capital Management each would pay more than $4 billion. Berkshire also would acquire $8 billion in preferred stock, with the rest of the purchase price being financed.
The blockbuster deal — which is subject to regulators' and Heinz shareholders' approval — is the latest for Buffett, who has been casting about for large deals to soak up the huge stockpile of cash that has been building on Berkshire's balance sheet.
The Heinz deal is typical Buffett, who has long invested in brand-name companies whose products he understands. In addition to its trademark ketchup, Heinz owns brands including Ore-Ida Tater Tots hash browns, Classico pasta sauces, and Weight Watchers Smart Ones frozen dinners. "It really fits the Buffett mold in terms of the kind of companies he's interested in," said Paul Lountzis, founder of Lountzis Asset Management in Wyomissing, Pa. "Ketchup is not going away."
Berkshire would earn a robust 9 percent dividend yield on the preferred shares. "In today's very low-yield world, that's a phenomenal financial kicker," Lountzis said.
Heinz shareholders would get $72.50 a share in cash, a nearly 20 percent premium to the ketchup maker's Wednesday closing price of $60.48.
Heinz has a large international presence, including in emerging markets, which is helping to offset softness in the domestic market. "Heinz has strong, sustainable growth potential based on high-quality standards, continuous innovation, excellent management and great-tasting products," Buffett said in a statement.
Several other large deals have been struck recently, as well, including the proposed $24 billion buyout of Dell Inc. and Comcast Corp.'s $16.7 billion agreement to buy the remaining stake in NBCUniversal.