This morning I was listening to NPR when I heard that Warren Buffett and a private equity group had just bought Heinz Corporation, the ketchup company, for cash, and that the Board of Directors had agreed to sell out for a price of 20% over previous closing.
My first reaction was that me and other long-term shareholders (I have held for over 10 years) were being taken for a ride. The more I have read today, the more I am certain that other factors are in play here. I don't know what these are, but this clearly could not have been for sound business reasons. The board needs to be sent to the farm for such a dismal premium.
The reason I bought HNZ is because the business has so many safeguards against inflation or recession. It is a staple product found in restaurants and refrigerators. McDonald's condiment packets, Ore-Ida potatoes, Smart Ones.. it is a staple business that is everywhere without being recognized overtly... but when it is absent or replaced with cheaper brands.. people notice.
That is what makes this a brilliant brand. How do you be everywhere, implicitly recognized as quality, but not visible enough to trip anyone's radar? Freakin genius.
In terms of inflationary pressures HNZ is susceptible to a wide range of commodity price pressures, including corn yields and futures trading for the corn syrup in their mainline products. But while shoppers may readily watch the price of gas at the pump like a hawk.. bleating when it goes up 10 cents a gallon (or ditto for a gallon of milk).. no one notices when a bottle of Heinz goes up in kind.
Did I mention this is a brilliant brand?
It has been able to raise its price over the years to keep margin over production costs steadily growing. And its marketshare remains strong.
Partly due to activist investor Nelson Peltz, Heinz has also improved its operations aggressively and pressured the Board to increase its dividends as well. Growing at double-digit rates these dividend payments helped buoy a rather attractive stock price that started clocking steady returns, year after year.
What makes me angry here is that based upon the past 4-5 years of activity, Heinz Corporation would have reached this magic 20% premium by 2014 or 2015, just a couple of years from now. There has been nothing untoward in its business model and its internal growth would have kept the stock on track towards the $72 buyout price.
The Board is malfeasant. No one sells out an entire company and betrays long-term shareholders for a price you would have hit in 8-12 quarters with business as usual. It is unconscionable that they would have found a 20% premium to be in the best long-term interests of the shareholders.
I hope that class-action suits are filed and these Directors held accountable for their actions. There has been nothing disclosed by the Company in any recent filings that would indicate Heinz has reached a peak valuation or is unlikely to continue growth in the next several years. Something is afoul in Pittsburgh, and it ain't the Monongahela.
So that's it world. I'm pissed for getting an extra 20% pop today. So mad.. I may actually buy Hunt's now in protest.
My first reaction was that me and other long-term shareholders (I have held for over 10 years) were being taken for a ride. The more I have read today, the more I am certain that other factors are in play here. I don't know what these are, but this clearly could not have been for sound business reasons. The board needs to be sent to the farm for such a dismal premium.
The reason I bought HNZ is because the business has so many safeguards against inflation or recession. It is a staple product found in restaurants and refrigerators. McDonald's condiment packets, Ore-Ida potatoes, Smart Ones.. it is a staple business that is everywhere without being recognized overtly... but when it is absent or replaced with cheaper brands.. people notice.
That is what makes this a brilliant brand. How do you be everywhere, implicitly recognized as quality, but not visible enough to trip anyone's radar? Freakin genius.
In terms of inflationary pressures HNZ is susceptible to a wide range of commodity price pressures, including corn yields and futures trading for the corn syrup in their mainline products. But while shoppers may readily watch the price of gas at the pump like a hawk.. bleating when it goes up 10 cents a gallon (or ditto for a gallon of milk).. no one notices when a bottle of Heinz goes up in kind.
Did I mention this is a brilliant brand?
It has been able to raise its price over the years to keep margin over production costs steadily growing. And its marketshare remains strong.
Partly due to activist investor Nelson Peltz, Heinz has also improved its operations aggressively and pressured the Board to increase its dividends as well. Growing at double-digit rates these dividend payments helped buoy a rather attractive stock price that started clocking steady returns, year after year.
What makes me angry here is that based upon the past 4-5 years of activity, Heinz Corporation would have reached this magic 20% premium by 2014 or 2015, just a couple of years from now. There has been nothing untoward in its business model and its internal growth would have kept the stock on track towards the $72 buyout price.
The Board is malfeasant. No one sells out an entire company and betrays long-term shareholders for a price you would have hit in 8-12 quarters with business as usual. It is unconscionable that they would have found a 20% premium to be in the best long-term interests of the shareholders.
I hope that class-action suits are filed and these Directors held accountable for their actions. There has been nothing disclosed by the Company in any recent filings that would indicate Heinz has reached a peak valuation or is unlikely to continue growth in the next several years. Something is afoul in Pittsburgh, and it ain't the Monongahela.
So that's it world. I'm pissed for getting an extra 20% pop today. So mad.. I may actually buy Hunt's now in protest.
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