Given the speculative frenzy around a supposed bid for Diageo from “Brazilian buyout specialist” 3G Capital (despite the source of the frenzy being a one paragraph news-in-brief), it’s perhaps worth casting an eye over 3G’s special treatment of previous acquisitions — such as Heinz.
And where better to start than Note 15 to the HJ Heinz Corporation II and Subsidiaries Q1 condensed consolidated financial statements, covering treatment of one of Heinz’s more important South American subsidiaries…
Venezuela – Foreign Currency and Inflation
The Company has a subsidiary in Venezuela that manufactures and sells a variety of products, primarily in the ketchup, condiments and sauces and infant feeding categories. The Company applies highly inflationary accounting to its business in Venezuela…
The Wednesday morning announcement that Heinz would buy Kraft was that rare thing, a big deal which didn’t leak.
The circle of advisors was small. Heinz, controlled by Warren Buffett’s Berkshire Hathaway and Jorge Lemann’s 3G Capital, were advised by Lazard, while Kraft were advised by Centerview. The public relations team at Brunswick only got the call on Sunday night, we hear.
Still, there were some lucky buyers of Kraft stock in the market before the deal was announced, with a number of block trades going through at $62 per share. Read more
Those seemingly clairvoyant speculators who hoovered up Heinz stock options just before Warren Buffett and 3G Capital of Brazil launched their joint $28bn bid were always going to get nabbed.
And now they have been. Rodrigo and Michel Terpins, Brazilian brothers, have agreed to pay a fine of $3m and forfeit the $1.8m they made cashing in their Heinz options — funds that were frozen in a Swiss brokerage account by the SEC immediately after the trades were noticed, even though the American regulator didn’t then know who was behind the trades. Read more
There’s been a fierce and fascinating response from the SEC to evidence of clairvoyant dealings in Heinz ahead of news of the Buffett/3G Capital takeover offer. The statement is here and the full SEC complaint is here.
Following reports of unusual activity in Heinz call options on Nasdaq on Wednesday – the day before the Heinz news broke — the SEC has obtained an emergency order freezing assets in a Zurich, Switzerland-based trading account which it reckons benefited to the tune of $1.7m from the Buffett/3G bid. Read more