H. J. Heinz M & A Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

H. J. Heinz M & A Case Solution

Introduction:

In December 2012, 3G (private equity firm) and Berkshire Hathaway had decided to acquire H. J. Heinz with the value of $ 28 billion (i.e. $ 72.5 per share) and they both were ensured that turnaround would lead to growth of business internationally. Initially the Heinz stakeholders were dealing the 30% premium for the stand alone business at $ 56 fair value per share and 20% premium to closing price. This valuation would result in successful deal for Heinz in terms of fair price paid for company; the buyer is Berkshire Hathaway and expectation of improving EBIT growth. As the economy was booming and many companies tend to record more profits and market was recovering after 2000 market crush but the case was opposite with Heinz; as it was facing losses and shareholders required instant changes and the pressure for Heinz was increasing and especially from the Nelson Peltz an activist investor, who holds 5.4% of ownership in Heinz.

Therefore, Peltz demanded to sell the business or at least to sell some core assets as the company can buy back its stocks. The company decided restructuring by closing its major revenue factories and terminating the employees that increased the company’s shares by $ 1 billion. Due to restructuring process, the performance of company was improving and potential investors were satisfied to invest in the company and also the current management of Heinz would help in growth of business as they have high expertise, experience and skills. Along with this, the citizens were happy that the company would not expand globally rather provide unique products and services in the native country.

Interests and strategies

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

Heinz was facing several issues in its business operations that were decreasing the profitability of the company, and Nelson Peltz aim was only to increase the shareholder’s value by restructuring of business, which includes, selling of non-core assets, terminating unproductive employees or selling the whole business. He was a futuristic investor who owned 5.4% in Heinz Company. Along with this, Heinz demanded five board seats to improve the performance of company that will increase its management power to control all the activities.

Nelson Peltz played major role for the acquisition by Berkshire Hathaway and 3G, as he wanted to increase the worth of shareholders either by taking measures such as restructuring or also selling whole company. Therefore, Heinz took major steps of restructuring in 2006, where he terminated 27,000 employees and closed fifteen factories, which led to generation of $ 1 billion buy back of shares and the restructuring was a successful plan that improved the performance of the company and also fulfilled the demands of Peltz as he secured two board seats and managed the activities as twelve person board. Therefore, the turnaround was initiated by Nelson Peltz that was successful and led to future growth nationally as well as internationally.

2. Discuss the positions of various stakeholders including Heinz shareholders, management, employees and citizens of Pittsburgh.

The company’s operations are affected by the internal stakeholders and external stakeholders. Other stakeholders include; such as independent directors who do not take part in day to day activities but highly influence in the decision of the company...................

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