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

H.J. HEINZ M&A COMPANY Case Solution

COMPANY OVERVIEW

This case is about the valuation of H.J.Heinz by Berkshire Hathaway and 3G capital. H.J.Heinz was established in the mid-18^th century as one of the first food processing companies in the United States. Heinz got its listing on New York Stock Exchange. In 1946, the company’s headquarters are in Pennsylvania, United States. Like many other contemporary companies, Heinz followed an optimal mix of aggressive and defensive growth strategies in the form of mergers, acquisitions, and organic growth. Heinz divided its business segments into North America, US, Europe, Asia Pacific, and Rest of the World.

h.j. heinz m&a case solution

Berkshire Hathaway and 3g are currently considering Heinz as an acquisition target company; the industry with in which Heinz operates is mature but Berkshire Hathaway and 3g Capital are expecting a lot of opportunities for Heinz in emerging markets. 3g Capital is an investment firm with headquarters in New York and Rio de Janeiro and Berkshire Hathaway is a holding company that was established in 1955 by the well renowned investor and business tycoon, Warren Buffet. Its headquarter is in Omaha, Nebraska; it is ranked ninth on the Forbes list of biggest publicly owned companies. Berkshire has a balanced portfolio of other companies, Heinz is a potential suitable target for the Berkshire portfolio. Both Berkshire and 3g capital consider Heinz as an undervalue company; they want to operate Heinz jointly on a whole new level, which can benefit both the acquirers.

PROBLEM STATEMENT

Heinz management and shareholders want to evaluate the offer from Berkshire Hathaway and 3g capital before taking any decision regarding this offer. They want to evaluate this offer on the basis of various valuation methods.

Nelson Peltz, the outspoken activist investor has a stake of 5.4 % in Heinz. The groundwork for the acquisition started during the time when Nelson demanded that the company should either sell its non-core assets or sell the whole company, as the company was weakening at that time. He proposed that Heinz needs strong management to run the company. After some serious pressure, he eventually managed to give the board some suggestions, which ultimately paved the first foundation for potential acquisition. He managed to perform that role, especially after when he got two seats on the board of Heinz Company. The two seats on the boards played their role and laid down the platform of acquisition for Heinz, which was a partial success of reconstruction plan. Lastly, Warren Buffet also expressed his support on the stand of Nelson Peltz and from there, the official acquisition talks began between 3G Capital & Berkshire, and Heinz.

DISCUSS THE POSITIONS OF VARIOUS STAKEHOLDERS INCLUDING HEINZ SHAREHOLDERS, MANAGEMENT, EMPLOYEES AND CITIZENS OF PITTSBURGH.

In order to understand the position of various stakeholders, there is a need to perform stakeholder analysis using Mendelow power interest grid.

Heinz shareholders are high power high interest stakeholders from the fact that there must be a correct bid price and premium for them; otherwise, the acquisition deal cannot go ahead.

Employees of Heinz are low power and low interest people, which means they have very low power to change the decision of acquisition or influence shareholders. They just need to be informed about the possible changes after acquisition so that they cannot create any problems after this deal, in terms of strikes and trade union demands.

The people of Pittsburg should be kept informed as they are low power but high interest stakeholders. As per Mendelow power interest grid, they can create significant problems in the event of acquisition. Heinz have past experience in the form of past acquisition where the deal with Hershey was cancelled when the citizens intervened during the deal..................

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