Thank you, Warren Buffett and Alex Behring. Thinking it through this P.M., your proposal to merge Heinz and Kraft Food Group must have been months in letting the scene develop appropriately.
Buffett's Berkshire Hathaway reduced its position in KFT (2013) in part due to concern over the ridiculous spin-off of the exaggerated-margin snack foods component, including the recently acquired UK's Cadbury, to a new corporation Mendelez. Nonetheless, BRK owned 193,000 shares of KRFT on its most recent SEC filing. I sold my shares of KFT in September, 2012, because I didn't understand the proposed spin-off.
Several years ago, Berkshire Hathaway had paired up with a Brazilian private equity group called 3G Capital via its New York managing partner, A. Behring, to buy the struggling Heinz ketchup producer and make it a privately-held corporation. Warren Buffett is a genius at this sort of figuring -- he had ways of deriving very accurate value estimates for every Heinz building, its trucking fleet, ad infinitum. So I imagine that the $23 billion was a lowballed offer, which nevertheless seemed appealing to the Heinz heirs and was accepted.
After they'd identified KRFT as a potential target, Buffett and Behring quietly developed their valuational analysis and waited. Perhaps they had realized it was run by folks who, as it has turned out, don't know what they're doing (not uncommon these days).
March 25th, following a several-month slide in KRFT share value (which I again owned for the 2.9% dividend), despite horrible last-qtr. earnings along with last week's blemishing recall of Macaroni and Cheese boxes which possibly contain metal bits, Behring and Berkshire Hathaway (via the Heinz entity) announced their proposal to merge Heinz and Kraft Food Group. I would receive a special dividend of $16.50/sh. when the deal goes through later this year, which essentially would compensate KRFT shareholders for their shares being diluted by half. So Wednesday morning, pre-market trading pegged KRFT up an amazing 35%! Apparently, Heinz has some international marketing arrangements in place which KRFT lacks.
Tuesday at market close I was down $726 on the KRFT position. Wednesday I sold it (not for as much as I wanted, but enough) regaining my January investment plus over $3000 profit, thanks to the momentum generated by Warren Buffett and Alex Behring's proposed merger. The money is in my IRA account imminently, rather than waiting for the maybe special dividend. New car -- I don't think so. Thanks, guys.