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No. of Recommendations: 2
A Good Fit For Berkshire
http://seekingalpha.com/article/1109091-h-j-heinz-co-a-good-...


Currently, HNZ trades at 18.7 times trailing earnings and 15.4 times forward earnings. Based on these numbers, it is difficult to argue that HNZ is "cheap", but Buffett does not necessarily seek out "cheap" investments. Buffett has famously said:

It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

In terms of the value of the deal, currently HNZ's equity value is $18.75 billion and the company has debt of $5.04 billion. So, given a reasonable premium, the total cost of the deal for Berkshire would be likely be between $25 billion & $30 billion. Buffett has said that he is looking for a deal between $20 billion & $30 billion so HNZ is just the right size.

...

Today, the Heinz family and trusts own only a fraction of the company. This was not always the case, but in 1995 the Heinz family and endowments sold a large portion of their holdings bringing their combined holdings of HNZ to under 4 percent. Today, no members of the Heinz family sit on the board of the company. The lack of family control over the company means that HNZ is a viable takeover candidate.

...

Given its simple and easy to understand business, competitive advantage, market leading products, and price, HNZ is a good fit for Berkshire and a possible target for Buffett. However, my speculation that HNZ could be takeover target for Berkshire is not the only reason to consider the stock. The company's solid growth prospects in addition to stealth dividend make this stock worth owning for any long-term investor, not just Buffett.
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