Heinz Handshake: 8 Weeks From Dinner to Deal

February 19, 2013 Updated Feb 19, 2013 at 10:28 AM EDT

By Paul J. Gough - Pittsburgh Business Times

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Heinz Handshake: 8 Weeks From Dinner to Deal

February 19, 2013 Updated Feb 19, 2013 at 10:28 AM EDT

When H.J. Heinz Co. Chairman, President and CEO William R. Johnson accepted a dinner invitation eight weeks ago from Alex Behring and Jorge Paulo Lemann, he had no idea that an offer for the 144-year-old company would be forthcoming.

Johnson said he thought that Behring and Lemann, whose private equity firm 3G Capital own Burger King, a big customer of Heinz's, wanted to talk, and maybe even complain, about ketchup. Instead, Behring and Lemann wanted to make an offer for Heinz.

"Turns out they were a happy customer," Johnson joked Thursday morning at a news conference at Heinz headquarters in Pittsburgh to announce the deal.

The $28 billion deal to take H.J. Heinz Co. private went from initial meeting to Thursday's surprise announcement over the course of about eight weeks. Even though it's is one of the biggest names in the global food business and no stranger to talk of mergers or acquisitions, Heinz wasn't up for sale before Behring and Lemann came calling.

But Johnson said that the proposal was so big - and the advantages as a private company so compelling -that he had a fidicuiary responsibility to take it to the H.J. Heinz board of directors. The $72.50 a share offer was about 20 percent higher than its $60 a share closing price Wednesday, and would if approved represent a 177 percent return on investment for shareholders.

And the big names of Warren Buffett, Berkshire Hathaway and 3G Capital, owners of Burger King, didn't hurt the proposal either. Johnson said that Berkshire Hathaway and 3G Capital are renowned "for doing the right thing for and with the businesses they own."

For his part, Buffett told CNBC earlier Thursday that Lemann first talked to him about a play for Heinz back in early December when the two were on a plane together. It was Lemann's idea even though Buffett acknowledged he had been following Heinz for years.

"I've got a file on Heinz that goes back to 1980," Buffett told CNBC.

The proposal then unleashed a steady process over the past six weeks.

"The board has worked diligently to evaluate this over the last 60 days," Johnson said.

Also involved were Centerview Partners and Bank of America Merrill Lynch, who were financial advisors to Heinz and Davis Polk & Wardwell LLP as Heinz's legal advisers. The board's Transaction Committee was helped by Moelis & Co. and legal advisers Wachtell, Lipton, Rosen & Katz.

Johnson - and Heinz in its news release - stressed that one of its top concerns throughout the whole process was making sure that the company remained in Pittsburgh, along with its charitable and corporate commitment to the region.

"It's in the contract, which is as strong as it can get," Johnson said.

It's less clear what the impact to Heinz's employment will be in Pittsburgh. Johnson said he hoped it would remain level or increase, but there were no assurances.