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Stocks B / Berkshire Hathaway
|Subject: Re: Rethinking Heinz addition||Date: 2/23/2013 2:23 PM|
|Author: Grahdodd||Number: 199026 of 216152|
This is a Financing Deal. Buffett gets 9% a year for $8 Billion of preferreds from a blue chip company thats been around since the 1860s. In an environment where Junk Bond credits yield 5%.
1/3 of Buffett's investment was in Equity, I presume as a precondition for getting the sweetheart of all sweetheart financing deals.
If the equity investment performs in line with the general market, Buffett will be thrilled with this deal.
He'll make a deal like this any day of the week. I thought it would take another verge-of-depression environment to get a deal like this ala Goldman/GE...ONLY Buffett gets deals like these. THATS why its so hard to "analyze".
Just another brilliant stroke by the master. In a tranquil stock market 5 year high/Junk Bond 5% world---this is a Grand Slam.
Don't make the mistake of overanalyzing the equity portion of this deal. Its an extraordinary deal with a money-good OK company. THATS the analysis that matters.
Just like the GE deal. Extraordinary deal with a money-good OK company. Buffett wasn't interested much in GE before--and hasn't owned it since. Doesn't matter. His INVESTMENT was a Home Run. Just like this Heinz investment IMO. Just like the Bank of America Titanic Home Run Investment---6% a year plus $3 Billion gift horse equity kicker in a year and a half. I remember people whining about B of A's fundamentals at the time. Wasted overanalysis. The fact is the Federal Reserve's primary objective (or at least the byproduct of its most significant systemically important policies since 2009) is to make sure people who own Bank of America obligations--get PAID.
Buffett never ceases to amaze.
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