News Column

Pittsburgh Investment Firm Squeezes Nice Profit From Heinz Sale

Feb. 14, 2013

Erich Schwartzel

Heinz

A Pittsburgh investing firm that bought H.J. Heinz Co. stock about two years ago made a 40 percent profit this morning when it sold more than $9 million worth of the ketchup maker's shares on news that an investment consortium headed by Warren Buffett would acquire the company.

Downtown-based Cookson, Peirce and Co. typically sells its stake in companies when they are acquired and no better deal is expected to come down the road, president Daniel S. Henderson said.

The $28 billion offer announced this morning by Berkshire Hathaway and 3G Capital is a "solid enough deal" that another suitor for Heinz isn't expected, said Mr. Henderson.

The loss of a publicly traded company in Pittsburgh is "bittersweet," but helped by Mr. Buffett's reputation for hands-off management, said Mark Luschini, the Pittsburgh-based Chief Investment Strategist of the Philadelphia investment firm Janney Montgomery Scott LLC. The famous investor isn't said to have an interest in company takeovers that leave some aspects of the operation gutted, said Mr. Luschini.

While the Heinz announcement came as a surprise, it's the kind of stable company that has become a Buffett trademark.

"The market doesn't need to be open for you to expect that you're going to sell ketchup today and tomorrow and the next day," said Mr. Luschini. For one thing, increasing population growth in developing countries has created a growing international market as dietary habits expand with economic growth.

The big-ticket deal is expected to generate interest in companies like "consumer staple" stocks like Heinz.

"Investment banking tends to be somewhat copycat-oriented," said Mr. Luschini. Investors will ask themselves, "What was it that Buffett and 3G saw in Heinz?"

Berkshire Hathaway and 3G Capital offered $72.50 in cash per share, a 20 percent premium on Heinz's closing share price Wednesday.

Heinz was the firm's 12th largest position and its second-largest local holding after PPG.

On a broader scale, Mr. Luschini pointed to the fact that the $28 billion acquisition is the third major deal just this week. Comcast announced earlier this week it would spend $16.7 billion to buy the remaining half of NBCUniversal that it did not own from General Electric, and US Airways and American Airlines announced yesterday plans for a merger.

"Many companies are flush with cash and they wouldn't be doing it if they thought the economy looked so weary," said Mr. Luschini. "It's a guardedly optimistic if not outright bullish signal."

Heinz has "been performing really well for a while now," said Mr. Henderson, and has earned a reputation among investors as a "consumer staple" stock that offers reliable dividends and an alternative to low-yield bonds.

Berkshire stock, he added, has gone up on news of the acquisition announcement.

"They're buying a good brand that they intend to own forever, which has always been Warren Buffett's philosophy," he said.

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Source: (c)2013 the Pittsburgh Post-Gazette Distributed by MCT Information Services


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