Berkshire Hathaway, 3G Capital buying H.J. Heinz
Cedar Rapids, Muscatine plants part of the deal
Two Eastern Iowa plants will be part of the $23.2 billion acquisition of H.J. Heinz by Warren Buffett’s Berkshire Hathaway of Omaha and 3G Capital Management of Brazil.
Under the terms of the deal, announced on Thursday, Berkshire and 3G will pay $72.50 per share. Including debt, the transaction is valued at $28 billion.
Heinz, which makes packaged foods and condiments, operates a plant at 5005 C St. SW in Cedar Rapids that employs about 200 and produces soups and entrees for the food service market.
The deal is expected to close in the third quarter.
The Iowa Department of Economic Development Board in September 2011 approved direct incentives of $100,000 plus refundable investment tax credits for a $10.9 million upgrade and an 8,000-square-foot addition at the plant.
Quality Chef Foods built the C Street plant in the 1990s before it was acquired by Heinz, and the Pittsburgh-based company has made several significant investments to upgrade its capabilities.
Heinz also operates one of its oldest manufacturing plant in Muscatine that produces 10 percent of the 650 million bottles of ketchup that the company sells worldwide. The facility, which has been in operation for 119 years, employs about 320 with an additional 150 contract warehouse and transportation personnel.
Built in 1892 at a cost of $4,000, the Muscatine plant was the company’s second manufacturing facility. Initially known as the Heinz Pickling Works, the plant produced pickles, horseradish and sauerkraut.
Berkshire and 3G will each contribute about $4 billion in cash to finance the deal, with Berkshire also paying $8 billion for preferred shares. The remainder will be covered by debt financing arranged by raised by JPMorgan Chase and Wells Fargo.
Heinz’s corporate headquarters will remain in Pittsburgh, the company’s home for more than 120 years. 3G Capital Management, an investment firm backed by several wealthy Brazilian families, will directly supervise Heinz’ operation.
“It’s our kind of company,” Buffett said in an interview on CNBC, noting its signature ketchup has been around for more than a century. “I’ve sampled it many times.”
Buffett praised the investment company’s record with Burger King, which it acquired in 2010 and then took public last year.
“Any partnership where I don’t have to do the work is my kind of partnership,” Buffett said.
“Any time we see a deal is attractive and it’s our kind of business and we’ve got the money, I’m ready to go,” he added.The Associated Press contributed to this story.