Analyst Insight by Ildiko Szalai, Senior Company Analyst at Euromonitor International
Heinz, the world’s 13th largest packaged food manufacturer, is set to be taken over by two private equity firms, Berkshire Hathaway and 3G Capital, for US$28 billion. Under this new private ownership, with a strong financial boost Heinz could be in a good position to intensify its international growth, M&A activities and potentially realise its long-stated ambition to become a major global player in baby food. Although becoming part of one of the world’s most successful private equity groups offers good financial synergies, it cannot benefit from operational leverages in the same way if it was integrated with a food industry player.
The deal has already been approved by the board but still needs to be voted on by the shareholders. It is expected to be finalised during the last three months of the year. The high cost, which consists of the US$23 billion price and company debt of US$5 billion, reflects Heinz’s global reach, strong brand equity and consistently positive financial performances. For the fiscal year ending 30 April 2012, Heinz reported net sales of US$11.6 billion, up 9% on 2010. In line with its overall strategy to grow its emerging market presence, Heinz reported growth of 21% in these regions in 2011.