Warren Buffett’s Dealmaking Ketchup Giant Kraft Heinz Heads Abroad in the Age of Donald Trump
On Friday morning, Kraft Heinz said it has made an unsolicited takeover offer for Anglo/Dutch consumer products giant Unilever, a surprise move that would yield one of the biggest corporate acquisitions in history at a value of around $143 billion. Unilever said in a statement it has rejected Kraft Heinz’s cash and stock offer because it “fundamentally undervalues Unilever.” The company further “sees no merit, either financial or strategic, for Unilever’s shareholders” and “does not see the basis for any further discussions.”
Kraft Heinz is backed by Berkshire Hathaway and it is run by Warren Buffett’s favorite deal-making partner, Brazilian private equity firm 3G Capital. Four years ago, Buffett and 3G Capital partnered on a $28 billion takeover of Pittsburgh-based ketchup giant Heinz. Within two years 3G Capital partner Bernardo Hees, Heinz’s CEO, oversaw a dramatic improvement in the ketchup-maker’s profitability.
Through plant closings, job cuts, and a ruthless focus on costs, 3G Capital increased Heinz’s earnings before interest, taxes, depreciation and amortization (EBITDA) by 35% to $2.8 billion, or 800 basis points, in two years’ time. Then 3G Capital sets sights on a new target, buying Kraft Foods for nearly $40 billion in March 2015. Again came a steady beat of plant closings, job cuts, and increased profits. In the fourth quarter, Kraft Heinz saw its operating income surge 22% year-over-year, despite a 3.7% decline in net sales and modest 1.6% increase in organic sales.