1. Describe the activities of Nelson Peltz and the role played in laying the groundwork for the acquisition by Berkshire Hathaway and 3G. Nelson Peltz was nominated to the DuPont board because Trian and DuPont could not reach an agreement about the splitting of the company. Berkshire Hathaway and 3G offered to but Heinz for about $23 billion. Peltz was a catalyst for the turnaround of Heinz by successfully getting on the DuPont board. The shareholders of Heinz have Peltz to thank for the price Heinz was sold at. 2. Discuss the positions of various stakeholders, including Heinz shareholders, management, employees, and citizens of Pittsburg. Heinz’s board of directors agreed unanimously to the acquisition. The CEO of Heinz approves of Berkshire and 3G and is excited about the new future of Heinz. Stakeholders for the most part approve because Heinz is being acquired from a position of strength and price is at an all-time high. Citizens are glad that Pittsburg will remain Heinz’s global headquarters so the community will continue to receive report.
3. Discuss the go-shop process, why it may be necessary, and risks associated with this process. The go-shop process allows other firms to make offers on a public company that has already received a purchase offer. One risk is a termination fee might have to be paid. It might be necessary to get a higher offer and for the original offer to create a floor. Go-shop process is meant to help ensure that the board of directors fulfills its fiduciary duty to make sure shareholders get the best deal possible from the transaction. 4. Why were so many investment bankers involved in this transaction, and what were their respective roles? Many banks had supporting roles in the acquisition. Independent advisory banks put the deal together and did most the work. Bank of America Merrill Lynch was Heinz’s other financial adviser, and JPMorgan Chase and Wells Fargo provided debt financing and some advice to Berkshire and 3G. 5. What was the acquisition premium? Was this reasonable?
The acquisition premium was about 20%. It was reasonable because even though the stock soared above the offer price, it came back down to the original offer price. 6. Why did this transaction propose zero synergies? Discuss and quantify potential synergies that could be realized, including where they come from, the period of time over which they can be realized, and quantify the impact on enterprise valuation. Kraft anticipated synergies
from the deal but there were none.
Some think that Warren Buffet overpaid for Heinz but others think it was a good deal because Heinz had potential growth. One synergy that could be realized is the frozen food industry that Buffet could have taken over. 7. What was the market reaction to the acquisition announcement, including share price and equity analyst commentary? At first Berkshire and 3G wanted to acquire Heinz at a price of $70 per share but Heinz thought that they were worth more so later the offering was raised to $72.50. Shareholders got a good deal because Heinz was at a high price and seemed to be on its way up.
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