Finance History | One PPG Place, Pittsburgh, 7 June 2013 — US$12.25 Billion Combined Common and Preferred Capital

On 7 June 2013, Berkshire Hathaway and 3G Capital completed their acquisition of the H. J. Heinz Company, paying public shareholders US$72.50 per share in 2013 dollars. The purchase valued Heinz's common equity at approximately US$23.25 billion in 2013 dollars. Its shares stopped trading on the New York Stock Exchange after the closing, and the food company became privately held. Berkshire supplied US$12.25 billion in 2013 dollars through a layered investment. It received 425 million common shares, warrants for roughly 46 million additional common shares and preferred stock with a US$8 billion liquidation preference in 2013 dollars. The preferred shares paid a 9 percent annual dividend, creating a contractual return ahead of the common equity. Berkshire and 3G each held half of the common voting interests, so governance and operating exposure were shared even though Berkshire's preferred capital gave its economic position another layer. Heinz brought well-known packaged-food brands, global distribution and recurring household demand. Those attributes could support stable cash generation, but retailers, commodity costs, currencies and shifting consumer preferences still affected margins and growth. The financing separated business ownership from claim priority. Common shares absorbed residual gains and losses, warrants preserved additional upside, and preferred shares placed Berkshire ahead of the common owners for dividends and liquidation value. That structure also imposed obligations on Heinz. A 9 percent dividend on a US$8 billion preferred liquidation preference represented US$720 million per year under the 2013 terms, cash that had to be supported by the acquired company's operations and financing plan. Private ownership allowed management to pursue changes away from daily public-market pricing, but it did not make those changes costless. Efficiency programs could improve returns while also creating execution, labor and customer risks if taken too far. One PPG Place was Heinz's principal executive address when the acquisition closed. The Pittsburgh tower anchors a transaction in which Berkshire combined senior income, shared control and equity participation to finance a global food franchise at a total personal commitment of US$12.25 billion in 2013 dollars. Photo: Cbaile19, CC0, via Wikimedia Commons.