Heinz Case Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Heinz Case Case Solution

Interests and strategies

Activities of Nelson Peltz and the role he played in laying the groundwork for the acquisition by Berkshire Hathaway and 3G.

The historical performance of Heinz was very poor, which resulted in strong pressure from the shareholders of the company to come up with some strategies in order to a better marketing position for the company in the market. Mr. Nelson Peltz owned Trian Fund Management of which Mr. Nelson was CEO, held 5.4% stake in the company, about 3,250 shares were acquired directly. As a related party contract, about 100,000 shares were owned and managed by Trian Funds Management. This overall investment interest represents 5.4% stake in the company. Mr. Nelson Peltz demanded five seats on board but after negotiations, he could only muster two seats.

After acquiring seats, he analyzed the overall performance of the company and concluded the fact that company is incurring huge amount of cost on non-performing assets. Immediately after his analysis, he proposed that either company should be sold out or shed all its non-core assets in order to stabilize the company from losses because of the pressure of improvement. The company launched a restructuring plan, which removed 27000 employees. In addition to this, a share buyback plan was also launched.

All the actions of this activist shareholder tried to reduce the risk of excess costing in order to expand the size of operations and efficiency. His actions are evident from the proposal made by 3G and Berkshire Hathaway to acquire the company at a bid price of $ 72.50 per share, which is higher than the intrinsic value of company. The increased price was due to the expected profitability for Heinz in future.

The efforts as well as reputation of Mr. Nelson increased the chances of purchase from the potential buyers. Moreover, his actions attracted Lemann and Buffet who estimated that the company has capability of future growth in emerging markets.

Positions of Heinz shareholders, management, employees and citizens of Pittsburgh.

The non-performance of the company affected every stakeholder, which resulted in strong pressure from the shareholders to come up with the strategy to perform well in future. Shareholders own the company through acquiring shares, so in the event of loss, the company would not be able to provide anything in return to the shareholders. The management as well as employees of the company were unable to perform their duties efficiently. It was Mr. Nelson, an activist shareholder; whose efforts as well as reputation helped the company in earning prospective buyers for Heinz.

With the help of reverse triangular merger, the future as well as current position of the company can improve. The company has always considered its employees as its assets, but this has added in the cost of the company. After acquiring 5.4% stake in the organization, Mr. Nelson proposed to cut the cost by firing 27,000 employees. Therefore, from the perspective of employees, the deal created issues.

Some shareholders of the company were in the form of investment advisors, banks, and other investors who invested some stake within the company and had the authority to make decisions based on future expected results provided by Heinz. However, majority of them were in favor of acquisition due to the high value per share offered by the acquirers.

The management controlled company’s operations; they were engaged in the process of acquisition through legal terms, termination offer, and autonomy due to the positive response from shareholders regarding the company’s acquisition. Their other responsibility was disclosure of information to the shareholders in order to know the expected future results generated by Heinz. Therefore, without the efforts of management, the shareholders would not know about the company’s operational activities...................

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