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Buffett Says Berkshire Stretched on Heinz Price in Bet on Lemann

Heinz generates more free cash flow than all but three U.S. packaged foods and meats companies with market values bigger than $1 billion, Bloomberg data show. Photographer: Kevin Lorenzi/Bloomberg
Heinz generates more free cash flow than all but three U.S. packaged foods and meats companies with market values bigger than $1 billion, Bloomberg data show. Photographer: Kevin Lorenzi/Bloomberg

Warren Buffett said his Berkshire Hathaway Inc. was willing to invest $12.1 billion alongside 3G Capital in a deal for HJ Heinz Co. because of his faith in the buyout firm led by Jorge Paulo Lemann.

“They are extraordinary managers,” Buffett said today at Berkshire’s annual meeting in Omaha, Nebraska, where the company is based. “We stretched a little because of that.”

Berkshire and 3G reached a deal in February valued at about $23.3 billion to buy ketchup-maker Heinz, agreeing to pay 20 percent more than the closing price before the acquisition was announced. Berkshire gets an equity stake of about $4.1 billion, as well as warrants and $8 billion in preferred shares paying a 9 percent annual dividend.

The billionaire chairman and chief executive officer of Berkshire said the deal is designed to give 3G better returns than his firm if Heinz does well. 3G, which has overseen companies such as Burger King Worldwide Inc., will run operations at Pittsburgh-based Heinz.

“It was an absolutely fair deal,” Buffett said. “I said, ‘I’m in.’”

Lemann, 73, Brazil’s wealthiest man, is a founder of 3G Capital, and previously led the $52 billion merger between Anheuser-Busch Cos. and InBev NV in 2008 with partners Marcel Telles and Carlos Alberto Sicupira. Buffett, 82, and Lemann sat on the board of razor-maker Gillette Co., and Buffett said today they discussed the Heinz deal in Golden, Colorado, in December.

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