Warren Buffett Breaks Down The Terms Of Heinz-Kraft Deal

It was revealed on Wednesday that Berkshire Hathaway Inc. BRK BRK and Brazilian investment firm 3G Capital will be merging H.J. Heinz Co. with Kraft Foods Group Inc KRFT. Chairman and CEO of Berkshire Hathaway, Warren Buffett, was on CNBC recently to break down the terms of this merger. "It's probably been in the works about 4 weeks or so, something like that," Buffett said. "It moved along quite promptly." The Details Buffett was asked how did 3G and Berkshire came up with the ‘complicated' structure of this deal where the two investment firms will take a 51 percent stake in the combined entity and will also pay a special dividend to existing shareholders of Kraft Foods. He replied, "Well, it was a matter of negotiation and it's correct that 3G and Berkshire Hathaway will invest $10 billion in Heinz just prior to the deal and then that money essentially will be paid out in a $16.50 a share dividend to the Kraft shareholders before the, majorly before the deal is completed. He continued, "And then there are presently about 600 million Kraft shares outstanding, after the deal will be roughly 1 billion 220 million or so, which 3G and Berkshire will own combined 51 percent and the present Kraft shareholders will keep their shares and own about 49 percent." Total Investment On his total investment in this deal, Buffett said, We put in $4.25 billion to buy common stock of Heinz initially and then we are putting another, we are putting in a little [over] $5.2 billion because we have about 53 percent of Heinz [going on] warrants. So we are putting another $5.2 something billion. So we are going to have $9.5 billion roughly in the common stock and will own 320 odd million shares of the new company."