From the moment the first headlines crossed the wire this morning, the story has been “Berkshire Hathaway(BRKB) Buying Heinz(HNZ)” or “Buffett Buying Heinz”. That is not at all the case however. 3G Capital, a Brazilian firm known for its investments in Burger King and InBev, is buying Heinz. It will own half the equity and operate the company. Berkshire Hathaway will put in between $12 and $13 Billion in cash and an exchange get the other half of the equity, plus a dividend-bearing preferred issue of unspecified size. This is just another instance of Berkshire using its cash to finance someone else’s deal at favorable terms. In the past, Buffett has usually taken warrants with his preferred, here he’s taking a significant equity stake, but Berkshire will have no operating role.
This is a good deal for Heinz shareholders and for Berkshire Hathaway shareholders and does say something about Buffett’s confidence in the sector(he’s not, for example, financing today’s big airline merger). But, be aware, the deal Berkshire is getting and the securities they’re buying, would not be available to the individual investor.
Disclosure: The author owns shares of BRKB