Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (12) | Ignore Thread Prev Thread | Prev | Next | Next Thread
Author: mungofitch Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 210434  
Subject: Re: Rethinking Heinz addition Date: 2/23/2013 1:20 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 2
The key is that the likely strategic investment play in this case is a
restructuring of Heinz's operations and financial structure, a skill set
arguably more greatly possessed by 3G Capital than BRK. BRK's main value-add is,
in turn, their deep pockets and the legitimacy of the deal being associated with BRK and Mr. Buffet.


Phrased another way, one might view it as a deal that only made sense
if some changes were made at Heinz. Berkshire doesn't have a management
team to do so, they don't do deals that require supplying management.

I'm not entirely sure this is really true, Heinz seems pretty good to me.
But it is a consistent interpretation.
Contrast it with this deal: Berkshire raises money with cheap bonds
as it did with BNSF and simply buys Heinz for $72.50 a share, financing
(say) 40% of the purchase price with cheap debt.
(Pure LBO but with debt on the buyer, not the target)
This isn't really Berkshire's way, to juice returns with recourse leverage.
The most interesting insight from this line of thinking is how unusual
the BNSF deal was in that respect. They key there is probably that
there was no real desire to use the leverage to boost returns, as it's
all going to get paid off pretty quickly. It's more of a long bridge.

Jim
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (12) | Ignore Thread Prev Thread | Prev | Next | Next Thread

Announcements

2013 Feste Award Voting Begins!
Who will win the 2013 Feste Award? Vote now for the Fool that most exemplifies the Fool Community mission of Learning Together!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Tax Strategies

TMFPMarti-Feeling Good
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement