November 15, 2024

DealBook: Buffett in $23 Billion Deal for Heinz, as Big Mergers Revive

Heinz will be sold to Berkshire Hathaway, the conglomerate controlled by Warren E. Buffett.Don Ryan/Associated PressHeinz will be sold to Berkshire Hathaway, the conglomerate controlled by Warren E. Buffett.

10:12 a.m. | Updated

Warren E. Buffett has found another American icon worth buying: H. J. Heinz.

Berkshire Hathaway, the giant conglomerate that Mr. Buffett runs, said on Thursday that it would buy the food giant for about $23 billion, adding Heinz ketchup to its stable of prominent brands.

The proposed acquisition, coming fast on the heels of a planned $24 billion buyout of the computer maker Dell and a number of smaller deals, heralds a possible reemergence in merger activity.  The number of deals and the prices being paid for companies are still a far cry from the lofty heights of the boom before the financial crisis.  But an improving stock market, growing confidence among business executives and mounting piles of cash held by corporations and private equity funds all favor a return to deal-making. 

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Mr. Buffett is teaming up with 3G Capital Management, a Brazilian-backed investment firm that owns a majority stake in a company whose business is complementary to Heinz’s: Burger King.

Under the terms of the deal, Berkshire and 3G will pay $72.50 a share, about 20 percent above Heinz’s closing price on Wednesday. Including debt, the transaction is valued at $28 billion.

“This is my kind of deal and my kind of partner,” Mr. Buffett told CNBC on Thursday. “Heinz is our kind of company with fantastic brands.”

In many ways, Heinz fits Mr. Buffett’s deal criteria almost to a T. It has broad brand recognition – besides ketchup, it owns Ore-Ida and Lea Perrins Worcestershire sauce – and has performed well. Over the last 12 months, its stock has risen nearly 17 percent.

Mr. Buffett told CNBC that he had a file on Heinz dating back to 1980. But the genesis of Thursday’s deal actually lies with 3G, an investment firm backed by several wealthy Brazilian families, according to a person with direct knowledge of the matter.

One of the firm’s principal backers, Jorge Paulo Lemann, brought the idea of buying Heinz to Berkshire about two months ago, this person said. Mr. Buffett agreed, and the two sides approached Heinz’s chief executive, William R. Johnson, about buying the company.

“We look forward to partnering with Berkshire Hathaway and 3G Capital, both greatly respected investors, in what will be an exciting new chapter in the history of Heinz,” Mr. Johnson said in a statement.

Berkshire and 3G will each contribute about $4 billion in cash to pay for the deal, with Berkshire also paying $8 billion for preferred shares. The rest of the cost will be covered by debt financing raised by JPMorgan Chase and Wells Fargo.

Mr. Buffett told CNBC that 3G would be the primary supervisor of Heinz’s operations, saying, “Heinz will be 3G’s baby.”

The food company’s headquarters will remain in Pittsburgh, Heinz’s home for over 120 years.

Heinz’s stock was up nearly 20 percent in morning trading, at $72.51, closely mirroring the offered price. Berkshire’s class A stock was also up slightly, rising 0.64 percent to $148,691 a share.

Heinz was advised by Centerview Partners, Bank of America Merrill Lynch and the law firm Davis Polk Wardwell. A transaction committee of the company’s board was advised by Moelis Company and Wachtell, Lipton, Rosen Katz.

Berkshire’s and 3G’s lead adviser was Lazard, with JPMorgan and Wells Fargo providing additional advice. Kirkland Ellis provided legal advice to 3G, while Berkshire relied on its usual law firm, Munger, Tolles Olson.

Article source: http://dealbook.nytimes.com/2013/02/14/berkshire-and-3g-capital-to-buy-heinz-for-23-billion/?partner=rss&emc=rss

Virgin Megastore in France Insolvent

PARIS — Virgin Megastore’s operation in France plans to declare itself insolvent in the coming week, the latest victim of an industrywide slump in compact disc and DVD sales as consumers download more film and music online.

Virgin France, which employs about 1,000 people, will announce to employees on Monday that it plans to suspend payments to suppliers, a company spokeswoman said Friday. Filing to suspend payments is the first step in France toward a court-ordered company restructuring.

Retailers in France, which has the euro zone’s second-biggest economy after Germany, are struggling: Unemployment is close to a 15-year high, and consumer spending has been soft.

Virgin’s operations in France have been unprofitable in the past four years, with debt for the division reaching €22 million, or $28.8 million, according to French media.

The company, which is no longer controlled by Richard Branson, the billionaire founder of Virgin Group, is not the only music retailer suffering from the industry slump. Its chief domestic rival, Fnac, is being spun off by its parent company, PPR, and has sold its Italian businesses.

In Britain, the global chain HMV said last month that it had “12 critical days” to pull in Christmas sales to help avoid breaching its banking agreements by the end of this month.

Virgin France is owned by the private equity firm Butler Capital Partners, which bought a majority stake in 2007 from the French conglomerate Lagardère. Mr. Branson sold the chain to Lagardère in 2001.

The group, which operates 26 Virgin- branded stores in France, including a flagship operation on the Champs- Élysées in Paris, generates annual sales of nearly €300 million.

Steep rental costs in high-profile locations in city centers and falling CD and DVD sales, combined with a recent decline in book sales, were mostly to blame for the group’s financial problems, the spokeswoman said.

Workers at the Champs-Élysées store, which opened in 1988, went on strike Dec. 29 to protest plans by management to terminate the lease at the premises.

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Article source: http://www.nytimes.com/2013/01/05/business/global/virgin-france-to-announce-insolvency-plan-monday.html?partner=rss&emc=rss

DealBook: Santander to Sell Stake in U.S. Auto Financing Group

Spain’s Grupo Santander, the euro zone’s largest bank by market capitalization, announced a $1.15 billion deal on Friday to sell a 35 percent stake in its automotive financing unit in the United States to a group of private equity investors, as it looks to shore up its balance sheet.

Under the terms of the agreement, Kohlberg Kravis Roberts, Centerbridge Partners and Warburg Pincus will invest a combined $1 billion for a 25 percent share in Santander Consumer USA. Dundon DFS will pay $150 million for a 10 percent stake in Santander Consumer USA.

“Following the transaction, Santander will realize a capital gain of approximately $1 billion,” the bank, which is based in Madrid, said in a statement. “The capital gain will be fully allocated to reinforce the group’s balance sheet.”

According to regulatory filings, Santander’s core tier-1 ratio – a crucial indicator of a bank’s overall financial health — stood at 7.1 percent in 2010.

Santander, which will retain a majority stake in its United States consumer financing division, went on an acquisition binge during the financial crisis.

In 2008, the Spanish bank bought the Philadelphia-based Sovereign Bancorp for $1.9 billion. That followed other global deals, including the acquisition of Britain’s Alliance Leicester for $1.9 billion and Brazil’s Banco Real for $1 billion.

Yet the deteriorating economic situation in its home market has begun to take its toll. According to the European Union, more than one in five of all Spaniards is unemployed.

That has hit Santander’s domestic operations as people struggle to meet their mortgage payments and companies can not meet their debt obligations. In the first half of 2011, the bank’s net profit fell to $5 billion, a 21 percent drop compared with the same period last year.

The automotive financing group in the United States has been a point of strength for Santander. The unit, based in Fort Worth, Tex., has been rapidly expanded its financing operations across the country, and reported an annual net profit of $455 million last year.

Deutsche Bank and Barclays Capital advised Warburg Pincus, K.K.R., Centerbridge Partners on the deal.

Article source: http://dealbook.nytimes.com/2011/10/21/santander-to-sell-stake-in-u-s-auto-financing-group/?partner=rss&emc=rss

Advertising: Amalgamated Hires a New Chief Executive

Amalgamated, which works for marketers like Ben Jerry’s, CarMax, Coca-Cola, MSG Networks and Qdoba Mexican Grill, is hiring Brian Martin as chief executive, succeeding Charles Rosen. Mr. Rosen, who was one of the three founders of Amalgamated in 2003, is leaving to pursue what he described as his longtime interests in public affairs and progressive politics.

The arrival of Mr. Martin is to be formally announced on Friday. It comes 11 months after a majority stake in Amalgamated was acquired by Eric Silver, a creative executive who left DDB Worldwide in New York to join Amalgamated as chief creative officer. Mr. Silver continues in that post, and is the majority owner of Amalgamated; Mr. Martin is acquiring an unspecified minority share in the agency as he comes aboard.

Mr. Martin, who is 51, has worked in management posts for agencies that include Deutsch, JWT and what is now Kirshenbaum Bond Senecal Partners. His specialty was business development, helping agencies attract new clients. Mr. Martin also served as chief marketing officer and chief executive of Qtopics, an online polling service.

For the last five years, Mr. Martin has run his own consultancy in New York, Source Martin, where he worked on agency reviews and other assignments for marketers like ATT, Citibank and MetLife. Source Martin is being dissolved as Mr. Martin arrives at Amalgamated, effective on Sept. 1.

The moves are among a recent reshuffling of the executive suites at agencies that has involved many prominent industry figures. The increasing challenges that agencies face as they seek to keep up with changes in consumer behavior, technology and the economy are leading to more changes in top posts.

“I think it’s the most exciting time in my lifetime to be in this business,” Mr. Martin said in a phone interview. He compared it to “the beginning of the TV era” in the early 1950s and added, “The next 10 years is when the most interesting things are going to get done.”

For that reason, Mr. Martin said, the place to be is “in the middle of the action” — that is, at an agency — rather than on the periphery at someplace like a consultancy.

Joining Amalgamated represents “an opportunity to come into a place where you don’t have to fix things, just turn up the volume,” he added.

Mr. Silver, 44, said he was pleased with results at the agency since his arrival, citing an expansion to about 40 employees, from 34 a year ago; new digital work like a “Fair Tweets” campaign for Ben Jerry’s on Twitter, which was tied to World Fair Trade Day; and the addition of new clients like CarMax.

Still, “I want us to play on a bigger stage,” Mr. Silver said, “expand, grow bigger.”

Mr. Martin “knows how agencies operate, knows how clients operate,” he added, “and his new-business record at his prior agencies seems pretty impressive.” That should offset any potential drawbacks from Mr. Martin’s never having been a chief executive at an agency, Mr. Silver said.

Mr. Rosen, in a separate phone interview, also endorsed Mr. Martin, calling him “a wonderful addition” to Amalgamated who will “fill in the mortar” around the agency’s “bricks” of its digital, creative and strategic work.

Mr. Rosen, 44, said he would sell his minority stake in Amalgamated as he steps down. He will subsequently serve as a consultant, he added, working with the agency on projects.

Although “I have such mixed emotions about leaving,” Mr. Rosen said, he agreed with an opinion expressed by Mr. Silver at a recent dinner.

“He said, ‘You know, Charles, when you talk about politics, your eyes light up,’ and it made me think,” said Mr. Rosen, who has worked in advertising for 13 years at agencies that in addition to Amalgamated included Cliff Freeman Partners.

“As I look at the current political climate,” Mr. Rosen said, “the discourse has shifted so far to the right that I felt it was time to take everything I’ve learned in the industry, at Amalgamated, about cultural strategy and branding, and apply it.”

“Look at how shockingly effective the Tea Party was from a marketing perspective,” Mr. Rosen said, adding that he would like to work on “creating an entity that would be a new populist movement” to serve as a liberal counterpoint to the Tea Party.

Mr. Rosen’s departure will leave only one of the three founders of Amalgamated still at the agency: Doug Cameron, the chief strategy officer. (Fiona McBride, president of Amalgamated, joined the agency in 2008.)

The third founder, Jason Gaboriau, was executive creative director before Mr. Silver’s arrival. He sold his stake in Amalgamated to Mr. Silver and left the agency; he is now a co-executive creative director of the Los Angeles office of Crispin Porter Bogusky, part of MDC Partners.

Article source: http://feeds.nytimes.com/click.phdo?i=899f37b33928ad126ad0f8f6f63f201c

DealBook: PAI Partners to Sell Engineering Firm for $3 Billion

PAI Partners, the French buyout firm, said on Tuesday that it had entered into a period of exclusivity with an investment group led by Clayton, Dubilier Rice and AXA Private Equity to sell its stake in the engineering company SPIE.

SPIE was put in play about two months ago, almost five years after PAI bought it for just over a billion euros.  The investment group, which is offering 2.1 billion euros ($3 billion), has emerged with the best bid, but the deal is contingent on talks with SPIE’s labor representatives.

Clayton, Dubilier Rice will own two-thirds of the majority stake in SPIE, with the remaining third split between AXA and the Canadian pension fund, Caisse de dépôt et placement du Québec, a person with direct knowledge of the situation said.

The private equity firms CVC, Bain and Carlyle all expressed interest in SPIE, but the winning investment group engaged in an accelerated process that took its rivals by surprise, the person said, without elaborating.

Olivier de Vregille, a PAI partner, said that under PAI’s ownership, SPIE “has grown dramatically –- it has acquired more than 50 companies across Europe and its workforce has increased from 23,000 to almost 29,000 -– its operational profit has doubled.”

Annual revenue at the company has grown to 3.8 billion euros last year from 2.8 billion euros in 2006.

The deal is the latest exit for PAI, which has sold its 50 percent stake in Yoplait to General Mills for about 810 million euros this year, and its controlling stake in the Italian clothing retailer Gruppo Coin to BC Partners for 644 million euros.

A group of about 23 percent of SPIE’s employees own 12.75 percent of the company, which specializes in electrical and mechanical engineering, building heating, cooling, energy and communication systems.

Roberto Quarta, a partner at Clayton, Dubilier Rice, said his firm’s previous investment in Rexel, an electronic goods distributor, had exposed it to SPIE’s markets.

“We are highly confident in the resilience of SPIE’s business model and its outstanding growth prospects,” Mr. Quarta  said.

Morgan Stanley and HSBC advised the investment group, the person with knowledge of the matter said.

Article source: http://feeds.nytimes.com/click.phdo?i=c0913e64429edd67385130b38d65d180