Billionaire investor Warren Buffett is adding "ketchup magnate" to his resume. On Thursday, Buffett's Berkshire Hathaway agreed to buy the H.J. Heinz Company, adding another iconic brand to Buffet's portfolio.
Berkshire will team up with Brazilian private-equity firm 3G Capital to buy the 144-year-old packaged-foods company. The $23 billion deal will be one of the largest food industry acquisitions ever.
"This is my kind of deal and my kind of partner," Buffet told CNBC. Buffet, who is known for vetting his investments carefully, praised Heinz's "fantastic brands."
"The company started in 1869 with horseradish, but they quickly shifted into ketchup," Buffet said. "So the ketchup brand has been around for 135 years or so. And I've sampled it many times."
The Heinz acquisition fits Buffet "to a T," says Michael J. de la Merced in The New York Times. Heinz "has broad brand recognition — besides ketchup, it owns Ore-Ida and Lea & Perrins Worcestershire sauce — and has performed well. Over the last 12 months, its stock has risen nearly 17 percent."
Not everyone sees this deal as classic Buffett. Indeed, the team-up with a private investment firm such as 3G is unusual, says Michael Ballaban in Forbes. "Mr. Buffett has expressed disdain for the private equity model in the past. He's even gone so far as to call it "Orwellian," saying that the firms themselves don't equip companies in any way for the future, larding up the companies with debt they can't afford in a way that is ultimately destructive."
Heinz, Ballaban continues, certainly fits the pattern of Berkshire's past acquisitions — it's a stable and profitable company — "but the transaction strategy is the weird bit."
Could Buffet's surprise Heinz deal be a stepping stone to something larger? "Up next for a mega-deal could be the Campbell Soup Company, or even Kraft," Ballaban predicts. "Neither one of those has really been mentioned as a target before. But with a deal as weird as this one, don't let Buffett surprise you again."