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$28B Heinz buyout expected to close Friday

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Warren Buffett, CEO and chairman of investment company Berkshire Hathaway speaks at the Economic Club of Washington's 25th anniversary dinner on Tuesday, June 5, 2012, in Washington.

Monday, June 3, 2013, 10:12 a.m.
 

H.J. Heinz Co. expects to complete its $28 billion buyout on Friday after receiving all the international approvals it sought for the deal that will have the iconic Pittsburgh ketchup maker go private.

Warren Buffett's Berkshire Hathaway and Brazilian investment firm 3G Capital will pay Heinz shareholders $72.50 a share after the deal closes. A 3G partner, Bernardo Hees, will take over as CEO, and the company's headquarters will remain in Pittsburgh.

Those are certainties. But many questions remain unresolved, such as whether costs and Heinz's 1,200-employee workforce will be trimmed and what role CEO William Johnson will continue to have with the company, if any.

In a typical buyout, the new owners move quickly to improve cash flow by cutting costs, said Diane Denis, a professor of business administration at the Katz Graduate School of Business at University of Pittsburgh. But often the targets of buyouts are inefficient and poorly managed, she said, and Heinz is neither.

“It's hard to know what they plan,” Denis said of Heinz's new owners. “But it seems like we may see less in the way of cost cutting than in the typical deal. ... Heinz has been operating reasonably efficiently.”

Hees, who has been CEO of Burger King since 3G bought the fast-food chain in 2010, is known for shaking up organizations and cutting costs. Analysts have said they don't expect major changes at Heinz under his and 3G's leadership. But the company will be nearly tripling its debt to $14 billion, which will need to be paid down.

3G officials have declined to comment until after the deal closes. Berkshire Hathaway will not be involved in the management of Heinz.

As for Johnson, who's been chief executive since 1998, the future also is unclear. He's said he would like to continue working and was expected to have discussions with 3G about a role with Heinz. Spokesman Michael Mullen declined to comment on Johnson's future.

Heinz had originally expected the deal to close in the July-September quarter but over the last month has pushed the date.

Shareholders approved the deal on April 30. Heinz said on May 24 that Chinese regulators had signed off. And Monday the company said the final approvals, from the European Union and Russia, had been obtained.

Heinz previously received clearances in the United States, Brazil, India, South Korea, Japan, Israel, Mexico, South Africa and Ukraine.

Also Monday, Bloomberg News reported that Heinz would be replaced in the Standard & Poor's 500 and 100 stock indices by General Motors Co.

Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or anixon@tribweb.com.

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