Warren Buffett's Berkshire Hathaway Inc. and private-equity firm 3G Capital are teaming up to buy ketchup-maker H.J. Heinz Co. in a $23 billion deal, one of the largest-ever acquisitions in the food industry.
As part of the deal, which has been unanimously approved by Heinz's board, shareholders will receive $72.50 in cash for each share, a 20% premium to Wednesday's close.
The deal represents a rare partnership for Mr. Buffett, who has used Berkshire's vast resources in the past to acquire top brands across a range of industries without teaming up with others. Mr. Buffett told CNBC Thursday morning that Berkshire was providing about $12 billion to $13 billion in cash for the deal, but that 3G-a Brazilian investment firm that took over Burger King in 2010-would be "in charge of things."
"It's their baby from an operational standpoint," he said.
The deal is the largest for Berkshire since Mr. Buffett agreed to acquire railroad Burlington Northern Santa Fe for more than $25 billion in 2009.
In 2011, Mr. Buffett said he was eager to use Berkshire's cash hoard to make deals.
"Our elephant gun has been reloaded, and my trigger finger is itchy," he wrote in his annual letter to shareholders that year.
The deal, which requires the approval of Heinz shareholders and the blessing of regulators, will be financed through a combination of cash, rollover of existing debt and debt financing.
Including debt, the $28 billion deal would rank as the largest-ever takeover for a pure food company, topping the 2000 acquisition of Bestfoods for $23.2 billion by consumer-brand conglomerate Unilever NV. That deal brought brands such as Lipton tea and Knorr Soups under the Unilever umbrella, which includes Lever soaps.
The deal also rivals the $31.1 billion buyout of RJR Nabisco by Kohlberg, Kravis, Roberts & Co. in 1988, but that deal included tobacco interests.
The Heinz deal is smaller than the nearly $60 billion acquisition of Anheuser-Busch Cos. by InBev SA, a deal that focused on Anheuser's beverage brands, namely the American brewer's Budweiser beer, according to Dealogic.
The deal is expected to close in the third quarter, the companies said.
Mr. Buffett said Berkshire and 3G would each own equity stakes of $4.5 billion in Heinz. Berkshire would also own about $8 billion of preferred shares, he told CNBC.
Shares of Heinz, which have been trading at all-time highs, surged to $72.56 in morning trading, topping the offer price and suggesting investors might be looking for a higher bid.
While the partnership with 3G is unusual, the Heinz deal is in other ways a typical one for Mr. Buffett and Berkshire. Mr. Buffett has said he values powerful brands and strong management, and in the statement he praised Heinz for its "strong, sustainable growth potential based on high quality standards, continuous innovation, excellent management and great tasting products."
Berkshire already owns car insurer Geico, paintmaker Benjamin Moore, underwear company Fruit of the Loom, and the Dairy Queen chain, among other brands. In Heinz, he will get a stake in a packaged-foods company known for its ketchup brand, albeit one that is now battling weaker North American sales.
3G Capital Management, a hedge and private equity fund with offices in New York and Rio De Janeiro, is best known for its $4 billion deal to take Burger King private in 2010. As of December, it still held nearly 244,000 shares of Burger King, or 70% of shares outstanding, with a market value at the time of $4 billion at the time. It was co-founded by four principals who sold their previous Brazilian private equity firm to Credit Suisse, including Jorge Paulo Lemann, a former board member of Gillette and Swiss Re, and controlling shareholder in Anheuser-Busch InBev.
Mr. Buffett said on CNBC that Berkshire's involvement in the deal began in December when he was on a plane with Mr. Lemann. Mr. Buffett had previously worked with him as a board member for Gillette.
Mr. Buffett said it was "possible" Heinz could be used as a vehicle to acquire other brands "over time." Of Mr. Lemann, he said "neither he nor I like to think of this of our last deal."
Berkshire Hathaway and 3G have pledged to maintain Pittsburgh as the Heinz global headquarters, according to the statement announcing the deal.
Heinz reported in November its fiscal second-quarter earnings jumped 22% as the company continued to get outsized sales growth in emerging markets and benefited from a substantially lower tax rate. But overall sales rose less than the company had expected, as the ketchup-maker continued to grapple with weak growth in developed markets, where it is spending heavily on marketing to try to improve results.