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Berkshire Hathaway CEO Warren Buffett on the company’s deal to buy Heinz with 3G Capital.
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Let's get to that match -- in hog heaven as in food happened Berkshire Hathaway and three G capital by ketchup maker hi it's.
The trends that yes you heard me correctly -- the transaction valued at 28 billion dollars.
Is the largest ever for the food industry.
Taking a look at what it is 72 dollars and fifty cents a share.
That's a 20% premium and you know actually initially you have the stock above that.
And now it is slightly below what so maybe the prices just right.
Let's ask Warren Buffett joining me now Berkshire chairman and CEO Warren Buffett good to talk to you weren't happy Valentine's Day -- -- I've I'm wearing ketchup spread and -- guidance credit and let's talk about this deal I I guess the number one question is really really reminds me of the Marvin deal Christmas Day back in 2007 the you'll love these holidays with -- time for Valentine's Day.
Well that's I don't I don't know but I like it -- -- -- delta that -- away.
-- to tell about how you actually picked the price of 7250 with a three G guys.
Yeah well they they did most of the work got -- deciding.
Well what the tea and I went along with a band.
I was reluctant but -- I signed up to the.
What now what 72 dollars and 38 cents and this is why -- really like to do these interviews in the closing bell because.
We really start to see the market absorbing the news in figuring out what the value is it's slightly below it does that to -- -- thank you think about this deal.
Well my guess is that the arbitrators and everyone except price.
-- get them I would guess that 90% of the volume at least on the buy side would be going -- arbitrage hands and they.
They calculate the probability of the deal going through they calculate their carry in terms of -- -- they got their cost of money and and when they get all through -- that they they're shooting for.
Generally small return is but but interest rates are -- all these day is that the that's the nature of the arbitrage business and they probably right this.
You know basically is virtually a 100% likely to go Perot and and that always -- and -- that calculation capital today.
What yeah I mean do you usually don't get into bidding wars if there were one you back away.
Not that there won't be a better more on the.
-- -- -- -- it hits such a big whale of a deal -- and I know you of the big whale of a deal.
Three -- will be the operators so we guess he will not be in the test kitchens here.
-- -- IY had I think my -- that's sort of what -- skill and does this like I actually had them out.
French Fries and -- of what would buy -- ever for watching it.
If it's almost like that lifting glasses of toasts there this is a little bit not entirely but a little bit reminiscent of when you.
Put money in and you backed Mars and Goldman Sachs buying Brinkley's Brinkley's gum but that was -- I believe about four billion dollars back them.
For -- I was that was -- a half billion war -- subordinated debt issue roughly and two billion per preferred but that.
That was purely.
Eight financing deal at that it's a long -- financing deal the Wrigley deal whereas this one is that this is a permanent ownership.
Operating.
Business deal per per -- so they're really quite different in that respect.
Well I think it's a question that is perplexing me Warren having covered you for as long as I have since what do you partner with private equity you in the past have.
Have not necessarily -- -- private equity but questions the way they do business you know you have said in the past that.
They load up companies with debt vs actually truly caring to -- and gro company why with three G be any different well.
-- actually.
That consists of and it was named after three dollars and it although by no -- led by at Georgia Apollo.
Eleven and bad there -- he's not really a private equity guy deity is the operate certain runs it and and global businesses who was staffed up.
As such charges pleasure and I think.
-- -- the out of date they need.
Starting it up and.
I -- I think I think some of the owners that went into that deal.
That they sell but I I have blood running -- assure you is that.
We will we will hold our interest and maybe even a larger interest over time.
In the in the -- -- and my guess is -- Apollo.
I'm more sure will be our partner forever on that.
OK so so.
Business -- -- this is about a there's about a private equity deal.
If it has certain things that make it look like a better about a private equity deal -- this is an operational business deal.
So there's been no discussion about shining it up and then -- -- it back to being publicly traded.
There's no way that I went to that but we're we're putting some money -- a but we're not gonna take some money out -- OK so that's not the way and I figured that's not the way you do business like this again obviously in the end.
People -- talked about this is not the first time you've been in food you had bought a bunch of shares of Kraft now partly model was but.
You -- critical of certain parts of their deal where they spot dates sold off the pizza business to buy Cadbury.
He still owns some of Kraft is that corrected -- and desperate and -- still is critical in retrospect looking at how craft a marvelous well there.
I I don't they got they got what out but I.
I was not happy about.
That the deal when they when they bought Cadbury but that's that's in the past.
You know will will focus on -- -- and forward.
Focus on -- sister as your food company that.
