Wednesday, March 27, 2013

Buffett Bloodied By Heinz

Oh, sorry, it's only ketchup:

"Buffett joins $23b deal for Heinz; Sale, biggest ever for industry, reflects Berkshire’s ambition" by Candice Choi and Josh Funk  |  Associated Press, February 15, 2013

NEW YORK — Billionaire Warren Buffett is dipping into the ketchup business as part of a $23.3 billion deal to buy H.J. Heinz Co., uniting a legend of American investing with a mainstay on grocery store shelves.

It’s the largest deal to date in the food industry and is intended to help Heinz accelerate its transformation into a global business. The company, based in Pittsburgh, also makes Classico pasta sauces, Ore-Ida potatoes, and Smart Ones frozen meals.

Buffett’s Berkshire Hathaway and its partner on the deal — 3G Capital, the investment firm that bought Burger King in 2010 — say Heinz will remain based in Pittsburgh.

Heinz chief executive William Johnson said at a news conference that taking the company private would give Heinz the flexibility to make decisions more quickly, without the burden of having to report quarterly earnings.

Heinz was founded by Henry John Heinz and his neighbor L. Clarence Noble in 1869. The first product was grated horseradish, bottled in a clear glass to showcase its purity. Ketchup was introduced in 1876.

Secretary of State John F. Kerry and his wife, Teresa Heinz Kerry, could make up to $1 million from the sale, according to financial data.

Related: The Kerry Confirmation

Debt Committee Failure Capstone of Kerry's Career

Well, let his term as Secretary of State play out because it could be an epical and epochal disaster. 

As for those charges of insider trading.... 

Heinz Kerry, the heir to the Heinz family fortune through her late husband Senator John Heinz of Pennsylvania, held at least $3 million worth of stock as of 2010, according to Kerry’s most recently available financial disclosure statements.

Yeah, her late husband called out the banks. Funny how people who do that end up dead.

It is unclear if she has sold any of those holdings. But Heinz shareholders will receive $72.50 in cash for each share of common stock. The transaction value includes assumption of the company’s debt.

Last year, Heinz had revenue of $11.6 billion, with ketchup and sauces accounting for just under half of that. Given the saturated North American market, it has increasingly been looking overseas for growth....


"SEC investigating trades in Heinz deal" by Ben Protess and Michael J. de la Merced  |  New York Times, February 16, 2013

NEW YORK — Regulators froze a Swiss account at Goldman Sachs on Friday after unearthing activities suggestive of insider trading in the $23 billion acquisition of H.J. Heinz, taking an abrupt action after one of the biggest deals in recent years.

The action, by the Securities and Exchange Commission, illustrates the temptation that such big takeovers may present. Despite a number of prominent crackdowns on insider trading, regulators continue to uncover cases involving traders who spin confidential tidbits into illicit profits ahead of deals.

On Thursday, Berkshire Hathaway and the investment firm 3G Capital agreed to buy Heinz, a deal that sent the company’s shares soaring.

In a complaint in US District Court in Manhattan, the agency took aim at a Zurich-based account that on paper reaped $1.7 million in gains after the stock jumped. Freezing the account, the SEC said, will prevent the traders from spending their winnings or moving the money.

But the identity of the traders, who funneled their bets through a Goldman Sachs customer account, is not yet clear. An SEC statement referred only to ‘‘unknown traders’’ who bought a series of options tied to Heinz’s stock. The agency’s investigation is continuing. Goldman, which is not accused of wrongdoing, was the conduit for the trades.

Unknown traders?

The agency’s complaint portrayed a brazen attempt by traders to abuse their position as keepers of market-moving secrets. Dozens of people had knowledge of confidential information about the deal, including bankers, lawyers, and executives at both the buyers and the seller.


I wouldn't expect anything to come of this, and you will see why a little lower down.

"FBI opens inquiry into suspect Heinz trading" by Ben Protess  |  New York Times, February 20, 2013

NEW YORK — The Federal Bureau of Investigation has opened an inquiry into suspicious trades placed ahead of the $23 billion acquisition of H.J. Heinz Co., a person briefed on the matter said.

The FBI’s involvement adds to the scrutiny surrounding the deal. Last week, the Securities and Exchange Commission froze a Swiss account linked to possible insider trading in the Heinz takeover.

Like the SEC, the FBI’s office in New York, one of the main players behind the government’s recent crackdown on insider trading, is examining a series of well-timed options trades made a day before Berkshire Hathaway and the investment firm 3G Capital agreed to buy Heinz. The deal sent the shares — and the value of the options contracts — soaring.

‘‘The FBI is consulting with the SEC to see if a crime was committed,’’ an FBI spokesman said in a statement.

The investigation centers on an unusual spike in options trades involving Heinz. The traders bought 2,533 call options on Wednesday through a Swiss account at Goldman Sachs, according to the SEC, which called the activity a drastic uptick.

At the time of the SEC’s action on Friday, authorities had not determined the identity of the traders, and the FBI declined to comment further on Tuesday. Goldman, which is not accused of wrongdoing, was the conduit for the trades. A bank spokesman said Goldman was cooperating with the investigation.

Using what is known as a call option, the unknown traders placed a bet on Heinz without actually buying shares. Instead, the investors have the opportunity to buy the stock at a given price through June.

Why does the name Buzzy Krongard leap to mind?

The anonymous investors spent nearly $90,000 on the call options, a position that skyrocketed on paper to $1.8 million after the deal was announced Thursday....

The growing inquiry may cast a cloud over the Heinz deal. While the SEC already raised concerns, the FBI’s examination adds to the scrutiny and for the first time raises the prospect of criminal wrongdoing.


I wouldn't get too excited just yet.

"Investigation into Heinz trades extends to London" by Ben Protessand Susanne Craig  |  New York Times, February 28, 2013

NEW YORK — Regulators have escalated an investigation into suspicious trades placed ahead of the $23 billion takeover of H.J. Heinz Co., focusing on a complex derivatives bet routed through London, according to two people briefed on the matter.

The development builds on a recent regulatory action on a Goldman Sachs account in Switzerland that bought Heinz options contracts. It also comes a week after the FBI said it opened a criminal inquiry.

An unusual spike in trading volume in Heinz options a day before the deal was announced first attracted the scrutiny of investigators. The Securities and Exchange Commission is also examining fluctuations in ordinary stock trades.

Now the SEC is looking into a more opaque corner of the investing world, examining a product known as a contract-for-difference, a derivative that allows investors to bet on changes in the price of stocks without owning the shares. Such contracts are not regulated in the United States, but are popular in Britain.

The expanded investigation illustrates the growing challenges facing US regulators. Tasked with policing the US exchanges, authorities increasingly find themselves having to hunt through a dizzyingly complex global marketplace.

Why must the system be so complex unless it designed to rob, loot, and steal?


Here is why nothing will happen to Buffett and Berkshire:

"Berkshire Hathaway apt to be one of Goldman’s top investors" by Josh Funk  |  Associated Press, March 27, 2013

OMAH — Warren Buffett’s company is likely to become one of the biggest shareholders in Goldman Sachs Group later this year, and Berkshire Hathaway Inc. won’t even have to part with any cash to do so....

Buffett and Goldman’s chief executive, Lloyd Blankfein, characterized this new deal as an endorsement of the bank — much as they did when Buffett invested $5 billion in Goldman during the financial crisis....

What was his beef again? And wasn't Blankfein the one who said the mortgage-backed securities swindles were God's work?

Berkshire is generally known as a passive shareholder that doesn’t interfere with the companies in which it invests. And Buffett’s soft spot for bank investments is clear; Berkshire holds large stakes in Wells Fargo & Co., US Bancorp, Bank of America Corp., and M&T Bank....


"Attorney General Eric Holder told the Senate Judiciary Committee that the nation’s banks had become too big to jail. “The size of some of these institutions becomes so large that it does become difficult for us to prosecute them,” Holder said at a hearing Wednesday. “If we do prosecute — if we do bring a criminal charges — it will have a negative impact on the national economy, perhaps even the world economy.”"

I expect that investigation of Heinz will be like one of their bottles of ketchup.

Investor Andy Kilpatrick, who wrote ‘‘Of Permanent Value: The Story of Warren Buffett,’’ said the new terms appear beneficial to both companies. Berkshire saves cash as it’s preparing to acquire half of H.J. Heinz Co. in a $23.3 billion deal, and Goldman enjoys Buffett’s backing while issuing fewer shares.

‘‘It saves Berkshire cash and hassle,’’ Kilpatrick said. ‘‘And it extends the Berkshire halo over Goldman.’’

Blankfein said he is pleased that Berkshire plans to remain a long-term investor. Goldman paid Berkshire $5.65 billion in 2011 to repurchase the preferred shares Buffett’s company bought in 2008 during the financial crisis.

Berkshire also got the right to buy the Goldman common shares in the same deal. Originally, Berkshire could buy Goldman stock for $115 per share until this Oct. 1. Now, instead of Berkshire’s paying $5 billion in cash for all 43.5 million shares, Goldman will compensate Berkshire with stock for the difference between its stock price and the exercise price near the original deadline Oct. 1. At Tuesday’s prices, that would give Berkshire about 9 million Goldman shares, or a stake of almost 2 percent....


And I suppose he would be feeling good about the banks, huh?

"Warren Buffett says US banks won’t cause problems for economy" by Josh Funk  |  Associated Press, January 11, 2013

OMAHA — Billionaire Warren­ Buffett says that American banks are stronger than they have been in years and won’t derail the economy.

They have destroyed the economy. Sure, they enriched Buffett and his band of corporate raiders and buyout specialists, but that's about it.

Buffett, who is chairman and chief executive of Berkshire Hathaway Inc., told Bloomberg television that the nation’s biggest banks have improved their financial position considerably.

Related: Interesting Bank Post 

Yeah, I'd say they have.

‘‘The banks will not get this country in trouble, I guarantee it,’’ Buffett told Bloomberg television in an interview that aired Thursday.

Yeah, they will just get another taxpayer-financed Fed bailout.

Berkshire Hathaway has large investments in Wells Fargo & Co., US Bancorp, and Bank of America Corp., and Buffett pays close attention to their condition. Berkshire also holds warrants to buy $5 billion in Goldman Sachs shares.

Buffett said the banks have largely cleared out the bad assets that hurt their balance sheets. And the current low interest rates have helped them.

That's what the Fed bought up with its billions in bond buying and such, and then they turned around and told us they either made a profit or are selling it at one.

‘‘Our banking system is in the best shape in recent memory,’’ Buffett said.

Judging by the record-setting profits on paper, yeah.

The country’s 19 biggest banks are about to undergo Federal Reserve ‘‘stress tests’’ to see if they could withstand a severe US recession and a global downturn simultaneously.

Buffett said Bank of America may soon try to repurchase the preferred shares he bought for $5 billion in summer 2011. Buffett would like to keep the shares because they come with $300 million in annual dividend payments, but he said he expects the bank to pay Berkshire $5.25 billion to end the dividend payments whenever it makes sense for Bank of America.

Makes you wonder how this economy can be such a piece of shit, 'eh?


From the man himself:

"Warren Buffett says 2012 was ‘subpar’ for Berkshire" by Josh Funk  |  Associated Press, March 03, 2013

OMAHA — Berkshire’s net income soared in 2012, but most of the increase came from paper gains on its investments and derivative contracts.

Without those gains, Berkshire’s operating earnings advanced to $12.6 billion....

Nearly all of its major business groups performed well in 2012, with the insurance units that include Geico and General Reinsurance leading the way because of significantly fewer natural disasters in the year.

Gee, I wouldn't have thought that from the alarming media coverage surrounding snow storms, Sandy, and drought. WTF? 

And aren't those Geico insurance advertisements funny? I see them all the time on the basketball broadcasts. (Yes, Amurkns, looting banks are behind diversions like sports)

Buffett said Berkshire’s acquisition luck turned last month when he agreed to work with the 3G Capital investment fund to buy the H.J. Heinz Co. for $23.3 billion....

Maybe not; I heard there might be something criminal there.

But Buffett and his business partner Charlie Munger won’t be satisfied by the ketchup deal.

It's called greed.

‘‘We still have plenty of cash and are generating more at a good clip,’’ Buffett wrote. ‘‘So it’s back to work; Charlie and I have again donned our safari outfits and resumed our search for elephants.’’

The way these guys talk about themselves is enough to make one sick, almost as if you had put too much ketchup on your fries. Yup, he's a brave, big game hunter (getting bailout a$$urances and $weetheart deals from the government)!

And Buffett said Berkshire finished 2012 with nearly $47 billion on hand, so he has plenty to work with even if he keeps about $20 billion around in case of emergencies.

That's one hell of an emergency fund.

Buffett did not offer any new details in the letter on the plan to eventually replace him....


Related: Buffett Made $10 Billion in 2011

Breakfast Buffett

Subpar, huh?

Also seeA bear is invited to wrestle Berkshire

Ketchup is forever, Buffett says, but beware of US long bonds

He said newspapers are a bad buy, and yet the Globe is hoping. 


"The New York Times Co., owner of The Boston Globe,, and, said Thursday that second-quarter revenue edged up 0.6 percent to $515.2 million as its net loss narrowed to $88.1 million from $119.7 million a year earlier."

Yeah, not a good investment at all. I've found that out the hard way, namely by reading one.

Also see: Digital sales help spur 12% jump in Globe circulation

Helps when you count each subscription twice.


Heinz sets date for vote on company sale

I don't see anything about insider trading or possible crimes in there.

Also see: Swiss Re settles dispute with Berkshire Hathaway