Berkshire Hathaway buying Heinz is unlike any deal Warren Buffett has ever done. In his past deals he was always a passive owner – he let existing management continue to run the company. In this case 3G, a private equity firm that has done terrific turnarounds in the past, will be the new management. They are putting in $1 billion of capital for half of ownership, but also a lot of sweat capital. On the surface Buffett is paying 20 times earnings, a fairly high multiple even for this high-quality business, but 3G involvement will likely elevate the earnings power of Heinz significantly over time. So this is a classic Buffett deal in one respect: Buffett is saying, I’m willing to pay a premium for a quality business that has long-term pricing power. (Heinz scores great on both counts). Buffett is willing to pay a premium for it, but this time the premium is less than it appears on the surface.
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VitalyKatsenelson
I was born and raised in Murmansk, Russia (the home for Russia’s northern navy fleet, think Tom Clancy’s Red October). I immigrated to the US from Russia in 1991 with all my family – my three brothers, my father, and my stepmother. (Here is a link to a more detailed story of how my family emigrated from Russia.) My professional career is easily described in one sentence: I invest, I educate, I write, and I could not dream of doing anything else. Here is a slightly more detailed curriculum vitae: I am Chief Investment Officer at Investment Management Associates, Inc…
I was born and raised in Murmansk, Russia (the home for Russia’s northern navy fleet, think Tom Clancy’s Red October). I immigrated to the US from Russia in 1991 with all my family – my three brothers, my father, and my stepmother. (Here is a link to a more detailed story of how my family emigrated from Russia.) My professional career is easily described in one sentence: I invest, I educate, I write, and I could not dream of doing anything else. Here is a slightly more detailed curriculum vitae: I am Chief Investment Officer at Investment Management Associates, Inc…
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