M&A Announcement

Feb 14, 2013

Press Release

Welcome and thank you for being here today for what is a truly historic moment for the H. J. Heinz Company, our shareholders, our 32,000 employees around the world, our customers, our global consumers and for the great city of Pittsburgh where the Heinz brand was first born. Heinz has entered into a definitive agreement to acquired by an investment group led by Berkshire Hathaway and 3 gs Capital, two names with stellar reputations for doing the right thing for and with the businesses they own. Doing the right thing has been a credo of the H. J. Heinz Company since Henry J. Heinz introduced his first product in 18/69. And that simple premise that served us so well for all of these years has led to today's exciting announcement about a new partnership and a new platform for growing our great company. Under terms of the agreement, Hain's shareholders will receive $72.50 in cash per share. That's a 19% premium to our all time high share price and a 30% premium to our 1 year average share price. It also represents almost 14 times EBITDA and over a 30% premium to our 10 year EBITDA average. Given this value and following a comprehensive review, our Board has unanimously approved this transaction. The deal will deliver a substantial return for shareholders and ensure our commitment to Pittsburgh. Upon closing this unprecedented transaction, Heinz will become a private enterprise. At $28,000,000,000 this will be the largest acquisition of any company in the history of the food business. Our shareholders are being well rewarded as this transaction is occurring from a position of strength after 30 consecutive quarters of organic top line growth and an all time record market cap. It's a great complement to all who have contributed to the success of this company. More than a decade ago, we began a journey of transforming Heinz from a U. S.-centric food company into a global powerhouse with a more focused portfolio of strong brands in advantaged categories. With 2 thirds of our sales now generated outside the United States and 25% of our sales in emerging markets, The company has built significant global reach and capabilities. Today's announcement confirms the value of what we have achieved and the strength of the platform we have built for continued superior performance. This new chapter will be filled with many opportunities for Hines to further expand our global reach, further strengthen our competitive position and create new opportunities for our employees. I'm thrilled to share this news today for a variety of reasons. First, we have succeeded in adding tremendous value for our shareholders on top of an already historic high share price that has climbed steadily during the past 4 years since the global financial crisis of 2,008, recently reaching more than $60 per share. Prior to today's announcement, we have delivered cumulative total shareholder returns of 133% since 2,006. At the agreed price of $72.50 total shareholder return since 2006 would be a superior 177%. This is a terrific achievement on all fronts. Secondly, this is clearly a moment to reflect on what we have accomplished in the past and the opportunities that lie ahead for our iconic brands. There are reasons for the value of Hain shares today. Among them are great brands, our unique emerging markets platform, our global platform of products with number 1 or number 2 share positions in more than 50 countries and most importantly the strength and capabilities of our people. We are regularly recognized in the United States for doing the right thing. Forbes Magazine called us one of the most trustworthy companies in America for our transparency in accounting and record of prudent management. And just a few months ago, the American Customer Satisfaction Index once again ranked Heinz number 1 in customer satisfaction among all food manufacturers for a record 13th consecutive year. This enduring success reflects our employees' dedication to making exceptional products that consistently satisfy consumers. Heinz is a perennial leader in our industry because we focus every day on meeting the consumers' appetite for premium quality, great tasting, convenient foods that deliver value. Quite simply, the opportunity to build upon this incredible platform and strengthen our world leading brands will be greatly facilitated by the proposed new structure and our position as a private company. The deal provides Heinz with more flexibility. And as a private company, we can be even more focused, more competitive, more nimble and benefit from much faster decision making. On behalf of our board members and shareholders, I would like to publicly thank both Berkshire Hathaway and 3 gs Capital who by their offer have acknowledged our success and the value of the Hines brand in our global portfolio of businesses. We look forward to partnering with them in what I know will be an exciting new chapter in the history of Hines. Berkshire Hathaway led by the person that many refer to as the world's greatest investor Warren Buffett owns leading businesses across a variety of industries. 3 gs Capital is a global investment firm focused on long term value creation with a particular emphasis on building and expanding great brands like Burger King and Budweiser. We cannot ask for a better endorsement and leadership than to have these highly respected individuals and their organizations behind the Heinz brand in the years to come. Finally, we are mindful of how we got here. Heinz has always been a company that has honored and leveraged our values and heritage. I believe that becoming a privately held food company allows us to deepen our roots in Pittsburgh and build more loyalty around our great brands. With an appreciation of this company's long held values and relationships around the world, Berkshire Hathaway and 3 gs Capital have pledged to maintain Pittsburgh as Hines' headquarters. The people of this region have contributed greatly to the success of over the decades. Similarly, our employees outside of Pittsburgh in offices, factories and warehouses around the globe represent us with distinction in all the communities where we operate. Therefore, our agreement also calls for ongoing philanthropic support of community initiatives and related programs, sponsorships and goodwill. We have invested wisely over many years in being a responsible corporate citizen, committed to safe practices, environmental stewardship and giving back to the community. This will not change. While our ownership will change, the great Heinz brand name will remain along with the people and product consumers around the world have come to trust and love. While we are engaged in closing this transaction, we are keeping focused on our business in every respect. Before we begin our new chapter as a private company, Henry Hines shareholders and regulatory agencies must approve this deal. We anticipate the transaction will close sometime in the Q3 of count for 2013. This is a great day for Haines shareholders, employees, customers and consumers. I have worked for Haines for 31 years. And like many of our colleagues, I'm exhilarated about what we do every day and I'm even more thrilled about the possibilities that lie ahead. Alex Behring, Managing Director Managing Partner of 3 gs Capital will share his perspective on Hines, how we got here today and why this transaction is such a great event in so many ways. Following Alex's remarks, we will accept questions from the press in the room. Thank you. And with that, I'll turn it over to Alex. Thank you, Bew, and thanks again for inviting me to be here today and good morning. I was very excited coming into Pittsburgh today and seeing Hain staging and being reminded that this is a city of champions. I think this is a historic day for the food industry. This is a landmark transaction, which I think will be a win for the company, its employees, its customers, its shareholders and the investors in the long run as well. I think that the reasons that led us to start the conversations with Hines that led to this transaction are simple and will come as no surprise to anyone. I mean, first, We're very excited about the brand. It's as Bill just said, it's a truly global brand. It has incredible consumer perception around the world and it's really a powerhouse brand. Number 2, the position the company is in, the enviable position that Heinz is in, in the food industry on a global basis being generally number 1 or number 2 in a variety of categories that are attractive, growing. And that position obviously as which brings me to the third reason that we were excited To that we're so excited to do this is the people, because I mean the company did not get to this position We would not have gotten to this position without the great work that was done in this company, in particularly the last 15 years under your leadership, Bill, where this company really was very, very successful. I mean, I'm not even going to mention the numbers that he just did which speak for themselves, but it was really, really a remarkable run that put the company in this position. It also goes without saying how pleased and how honored we are to be partners with Berkshire Hathaway, which obviously does not require any introduction. And it was refreshing earlier this week on Monday when Bill And I had the pleasure of eating lunch with Warren Buffett in Omaha to see Someone of his extraordinary accomplishments and stature to see how excited he really is with the prospects of this business and how much of the Meyer bill, the Myers brand and the company. As Bill mentioned, we and our partners at 3 gs have been involved in a variety of consumer companies, more recently Burger King for 24 years in what today's Anheuser Busch and BAV. And we're really all about long term value creation. We really are committed to strong brands on a global basis and we're continuously searching for excellence in everything that we are involved in. And I think as we hopefully are proud now to be part of the path forward here at Haines that we are very excited to be a part of that. And obviously as Bill remarked earlier, We are very proud of the company's Pittsburgh heritage. This company has been around for 140 years approximately here. And so we are committed to keeping the headquarters here in Pittsburgh and to continue to be involved with Hyatt stadium and the community. That's all I had to say. Thank you for your attention. And I guess we open for questions Mike? Well, before we do that, in order to really indoctrinate you to Pittsburgh, we have a terrible towel. There you go. And the good news is this is in the right color. And I'm sure Dan Rooney will see this and immediately call me and say, no, it's supposed to be gold and I'm saying it's red for Heinz Ketcher. Thank you so much. And your 9 year old daughter I'm sure is going to take this away immediately. Isabelle will elect us. Sure. Drew Singer from Thompson Reuters. Good morning. Good morning. 3 gs has been associated with some aggressive cost cutting measures in the past. Is that a strategy we're likely to see here? And if so, in what areas have you identified? I think that we've been involved in a variety of deals in the past. Some of them had a lot of cost optimization and opportunities and efficiency and some of them didn't. And I think here It's very early to say. I think we're just getting involved and have several months ahead of us to get to understand the team and the people. And this certainly is a company that if you were to compare and contrast with some of the businesses that we got involved with in the past, this is a company that's doing extremely well as it is and has been doing extremely well for a number of years prior to our involvement. Good morning, gentlemen. I'm Keith James from KDK Radio. Mr. Johnson, when did this deal start and who sought whom? It started actually almost 8 weeks ago this week when Alex and Georgie Lemmon, one of his partners visited me. We had dinner. Actually, I thought they were coming to have dinner with me because they own Burger King and they were a customer and they were unhappy. Turns out they were a happy customer and that led to further conversations. We did not solicit this. They came to me unsolicited. But as a public company, when they visited us and we have a fiduciary responsibility to follow-up on this. Shortly thereafter, we had additional conversations and then a proposal was sent in a proposal that we then took to the Board and the Board has worked diligently to sort of evaluate this over the last 60 days. I think it really began in earnest about 6 weeks ago and we have been working diligently and assiduously over the last 6 weeks with the board and with the other side to get it to today's announcement. I'm Dave Bonney of WPXI TV here in Pittsburgh. Mr. Behring, There's a lot of legislators, local leaders in the community, workers and even residents who want the guarantee that Hines will stay in Pittsburgh. Words are sometimes meaningless. What guarantee can you give this community? So we have said that publicly in a variety of businesses. Warren Buffett has said it publicly and it's on the merger agreement. It's in the contract, which is about as strong as it can get. And then Warren Buffett Monday gave us his assurances that he had absolutely no interest in this company leaving Pittsburgh. Neither do we. And Hello, Caitlin Riley. Caitlin Riley with the Pittsburgh Post Gazette. Just to follow-up on that question, because you did mention that this might deepen the roots This company has in Pittsburgh. What change if any will people here see now that once this merger is completed? Well, I think initially you won't see any change. I mean, I think Pittsburgh has been Heinz's home since 18/69 and we will continue to honor our Commitments in Pittsburgh, you'll still see Heinz Field. You'll still see Heinz Chapel. You'll still see Heinz involved with a number of things. I think over time, I think to further your question, I think over time what you'll see is hopefully a growing platform for substantial global growth. I mean, I think one of the things that interested 3 gs and Mr. Buffet in moving into Hines was the ability to use this as a platform to sort of get bigger around the global food industry and Pittsburgh obviously being our headquarters that would benefit Pittsburgh over a period of time. But I think initially and I probably think even a year from now you won't see anything that really will change your view of Pittsburgh. We will simply not be listed in the papers every day under the stock tables, but we will continue to be here and continue to be very much involved with the community. And regarding jobs, will there be a change in the number of jobs Heinz has here? I think it's too early to say. And as Alex said earlier, we have not had those discussions yet. But long term, it could go the other way. Long term, we may have more jobs here as the business bigger. And so again, I think the thing you all have to keep in mind that makes this different than most situations is this company is being acquired from a position of strength. I mean our stock has been at an all time high. We've had 30 consecutive quarters of organic top line growth. I mean this company has never been stronger. That doesn't mean there won't be changes going forward, but I think ultimately this will be a platform for really doing bigger and better things in this industry. It is interesting as an aside that if you look at the market today, a number of our peer companies are trading up on the news about us. And I will leave that implications of that to your own judgment and discretion. But I do think that our goal here is to make this a bigger even more global company. And I think that's a goal we share with 3 gs and with Mr. Buffet. Bob Mayo from WTAE TV here in Pittsburgh. You had meetings with some employees locally here earlier today. What is being conveyed to employees? What can you tell them right now in the families of employees that are listening number 1. And number 2, what changes if any are ahead for benefits, for pensions, for working relationships with employees here? Well, I met with employees. Mr. Behring was not in the meeting with employees. I met with employees this morning and what turned out for me to be a very emotional movement, if you talk to my I think I spent about half the time in tears and the other half telling jokes. And it's a very emotional day. Having said that, I also told the employees that certainly over the next 4 or 5 months before this initiative closes, there will be no changes that they will continue to be expected to perform their jobs as usual, that business will continue to run the way it's been run, that leadership won't change. And I think beyond that I said to them the more value we create as employees, the more opportunities we identify, I think the safer people will be. And I also said to them, but there are certain things I couldn't comment on because I don't know the answer to it and that's one of them. I don't know long term what the employment situation will be. We have 1200 people in Pittsburgh between our North American operations and our world headquarters operation. And I think given the fact that we're remaining in Pittsburgh and we have a desire to grow, I think there can be some assurances that a number of people are going to remain committed to this company and employed by this company. But I think beyond that it's just too early to comment because we just don't know. Teresa Lindeman from the Pittsburgh Post Gazette. You've long been targeted speculation about takeover and opportunity. So Why take this offer? Why listen this time? Well, again, I think the business is being acquired for the purposes of taking it private, Teresa, and then to use it as a global platform from which to build a bigger and better business. The offer was such that I simply felt compelled to take it to the Board as part of my fiduciary responsibilities and the Board really takes over in this process. And the Board hired outside representation and outside advisers on their own. The company had representatives and advisers also working on this. And I think the Board finally concluded that the value opportunity for the shareholders was just too great to pass up. I mean this is the largest transaction in the history of global food business. I mean think about that for minute that puts it in perspective. And secondly, one of the things we agreed on at the very outset was I told them that Pittsburgh was non negotiable that Pittsburgh is my home. Pittsburgh is the home of all our people. Pittsburgh has been the home of this company since 18/69. There have been 6 CEOs and 5 Chairman in 144 years of this company. It's a record I don't think any other company in America can match. And those were all very important considerations for the Board as well as the treatment of the employees and as well as just our the fact that our talent and capabilities lie here. So I think when you combined all that together, the Board concluded that it was such a compelling proposition that they simply had no choice but to recommend it to shareholders. And I think the Board does so enthusiastically and with a very good feeling about the future of the Hines Company. Harold Hayes, KDK TV. It's probably a similar question. Given the offer that was made, what would have been the disadvantages to operate as you head as a public company? Well, I think in a private setting there are things we can do in terms of more rapid decision making. We don't have to worry about quarterly earnings and quarterly communications with investors and the market which takes a fair amount of management time and is hugely distracting. And I think so our view was particularly being partnered with 3 gs who brings a similar mindset and Berkshire Hathaway that opportunity was to really be able to build this brand even more globally than it is today to give our employees opportunities they maybe couldn't get in a public setting. And I think fundamentally this company is returning to its roots. I mean it's interesting most of the people in this room are obviously too young to remember that fortunately me too. But this company was a private company for 80 years and then it became a public company. Now it's returning to the roots that HJ built this company around and that eventually one of the members of the generational changes decided to take public. So I don't think from From a community standpoint, there's going to be anything that you'll notice differently about the company. And I think the employees are both enthusiastic and frankly there's a little angst about what this means for them. But I can tell you the response we got today from the employees was terrific. I mean, at the end of the presentation, the employees applauded, cheered. They understand we're going to be very open with them. And I think it's just generally a better environment for us to deliver on our growth plans. Drew Singer from Thompson Reuters. Speaking of the community, how will this transaction impact the relationship between Hines and the Hines Foundation? Will it see any kind of windfall from this? Will it see an increase or a decrease in funding over time? Well, I think there's a number of Heinz Foundations. We have a company foundation, which we'll continue to fund in the normal manner that we've been funding it and that's involved in a number of charitable activities including our micronutrient program which is a global program to feed children who are suffering from anemia or have vitamin A deficiencies and that will continue to operate as it has. The other foundations you'll have to ask them. It's really related to the family foundations. We have no idea how many shares they own of Heinz Stock or what their positions are because they're not at a level that requires public disclosure. So again, I don't want to speak for them. I'll just speak for our own foundation. We have sponsor a Pittsburgh Business Times. So does the management leadership stay on and for how long and what are your future plans Bill? That has not been determined. As part of this kind of transaction, management and the other side are predominantly focused almost not predominantly entirely focused on getting the best deal for shareholders and employees. There's been no discussion about the future of management. There's been no discussion about my tenure and what happens going forward. There's been no discussion about any other members of management nor will there be for a while. The contract has now been signed and those discussions will probably take place over the next several months. Clearly, I've been in this job for 15 years. I'm the longest tenured CEO in the food business, certainly in America and probably globally. I am way too young to retire. My wife is in the back of the room said you're not sitting at home and having lunch with me. So I hope to continue to do something. If it's not here, I hope it's somewhere else. But I can tell you that I don't play golf, don't play tennis, I jog. And believe me, I'm not good enough to jog for 14 hours a day and I'm used to working 14 hours a day. So something is going to happen. But in terms of our relationship, we have not had any discussions about the management team. Very excited to have those discussions at the right time when we're precluded from having those discussions for the same reasons Joe just alluded to. Mr. Behring, Keith James with KDKA Radio. For you, why this type of transaction as opposed to just buying a whole bunch of stock? Keith, we like to be involved in this company's long term. I think that this as Bill alluded to, we like a private scenario. We think the private scenario does allow Speed it's very speedy decision making. It does allow you to focus on what's right medium term, what's Right long term and not necessarily it's right every quarter. So we were attracted by that. And I think that format suited very well our partners at Berkshire Hathaway as well.