Famous for ketchup, StarKist tuna, and other food products, H.J. Heinz enjoys a global presence. But on Wall Street, the company gets no star billing. Most analysts have gone sour on the stock and have trimmed earnings estimates for 1995 and 1996, in part because of sluggish sales and earnings during fiscal 1994. Yet Heinz stock is buoyant, trading at 36--not far from its 52-week high of 39. What's cooking?
Value investors--pros who buy into companies whose stocks are trading below their estimated intrinsic worth--think Heinz will be the target of a takeover offer, as the food industry consolidates.
One New York hedge-fund manager believes that Unilever, the Anglo-Dutch consumer giant with sales of about $41 billion, has been eyeballing Heinz for a possible bid. Unilever, which primarily produces food, beverage, and detergent products, is also big in specialty chemicals.
This money manager also figures that Heinz is worth about $50 a share in a takeover. Several insiders, including a number of big investors, "want to cash out, and they have been behind the move to sell the company," says this pro. He notes that Heinz Chairman and CEO Anthony O'Reilly, who has been selling off assets as part of a restructuring, may want to wait until the turnaround is well on its way before looking for a buyer. By then, the price of the stock could be much higher. But suitors, especially Unilever, will want to do a deal sooner, this New York investment pro argues, when the shares are still reasonably inexpensive.
AMERICAN PIE. Says one analyst: "Buying Heinz makes strategic sense for Unilever, which has been trying to expand its food operations and extend its reach into the U.S." About 57% of Heinz revenues and 48% of profits stem from operations in America. The rest is generated primarily in Europe and Asia.
In addition to ketchup and tuna, Heinz's lineup of brands includes 9-Lives, Jerky Treats, and Meaty Bone pet food; Steak-Umm meat products; Alba low-calorie beverage; canned soup and beans, and Plasmon and Nipiol baby food.
Sales for the year ended Apr. 27, 1994, totaled $7.04 billion, off slightly from fiscal 1993's $7.10 billion. Smith Barney analysts Robert Morrow and Scott Glasser see fiscal '94 earnings of $2.33 a share, off from $2.35. Heinz and Unilever both won't comment.