Investors content to take Buffett's 20 percent Heinz premium

Fri Feb 15, 2013 1:53pm EST
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By Olivia Oran

(Reuters) - Warren Buffett says he will not pay a penny more than the $72.50 a share he is already offering for ketchup maker H.J. Heinz Co HNZ.N, and after an initial hesitation, most investors seem to be taking him at his word.

Buffett's Berkshire Hathaway Inc (BRKa.N: Quote) and the Brazilian private equity firm 3G Capital struck a deal Thursday to buy Heinz for $23.2 billion in cash. The legendary investor made clear in a CNBC interview on Thursday that the bid was his final offer.

The deal, which came together in less than two months, offers shareholders a 19 percent premium to what had been the stock's all-time high and a 20 percent premium to the shares' last pre-deal close. But for much of the day on Thursday, shares traded above the offer price, suggesting that some people were holding out hope for a better figure.

That hoped-for figure does not appear to be coming anytime soon, though.

"I'll take a 20 percent premium in this environment any day. It's rich enough that you avoid someone coming in and offering a little more, but then again it's not necessarily in rarefied air," said Matt McCormick, a portfolio manager at Bahl & Gaynor in Cincinnati, which holds Heinz shares.

"Someone could have offered a little more but they're likely not going to go through a proxy fight with Buffett."

Heinz shares ended Thursday precisely at the offer price, and as of Friday afternoon were down 0.4 percent at $72.22. At least half the sell-side analysts covering Heinz came out with notes following the deal describing the price as fair, or even a bit rich by historical standards.

"We're pleased with the deal — any time you can get a 20 percent premium on a food stock like this, it's a good thing," said Michael Sadoff, portfolio manager at Sadoff Investment Management in Milwaukee.   Continued...

Warren Buffett attends the Allen & Co Media Conference in Sun Valley, Idaho July 12, 2012. REUTERS/Jim Urquhart