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Warren Buffett's 2013 Investments

Written By Brian Hicks

Posted February 28, 2013

Two major deals are in the offing for Warren Buffett, the famed Sage of Omaha.

First, Monday saw Berkshire Hathaway (NYSE: BRK.A), Buffett’s firm, announce that it is buying up the Tulsa World, a newspaper has a circulation of 95,000. The acquisition would bring Berkshire Hathaway’s newspaper count to 28 dailies, both small and medium-sized.

Separately, your ketchup now belongs to Mr. Buffett following an announcement two weeks back wherein Heinz (NYSE: HNZ), the worldwide ketchup company, announced Berkshire Hathaway and 3G Capital would buy it up. That indicated the food market’s largest deal ever, but more on that in a bit.

The Tulsa World announcement was made by Berkshire Hathaway and the Omaha World-Herald (also owned by Berkshire). No specifics relating to the deal were detailed. The Miami Herald reports, quoting the chair of the World Publishing Company, which owned the Tulsa World until this deal:

“Our family takes great pride in the Tulsa World and its many years of service to Tulsa and Oklahoma,” Robert Lorton Jr. said. “The newspaper business has become a difficult business model within a changing society and in particular for local family owned newspapers.”

Berkshire Hathaway has significant interest in newspapers. Quite aside from the dailies mentioned earlier, the company also owns 40 other newspapers, monthly publications, and even regional magazines. This is a widespread business, and the publications span Nebraska, Iowa, Texas, and all the way to Alabama and Florida.

In 2012, Berkshire invested $142 million in launching its newspapers unit, buying up 63 Media General newspapers. Only one newspaper—the Manassas News & Messenger—had to be closed near the end of last year due to failing performance, as the Miami Herald reports.

Buffett’s affinity for newspapers and publications is fairly well known; he believes they are organs that deliver vital information about their local or regional communities and thus will continue to remain valuable for years to come.

Buffett—and indeed Berkshire Hathaway—is also known for not steamrolling his acquisitions in this context, instead allowing the newspapers to retain their editorial freedoms. Despite Berkshire’s ample investment in newspapers and magazines, though, these publications still represent just a fraction of Berkshire’s portfolio.

As far as the ketchup deal is concerned, H.J. Heinz stated a couple of weeks back that Warren Buffett’s Berkshire Hathaway and Jorge Lemann-co-founded 3G Capital would be buying up the Heinz company for $23.3 billion.

That announcement actually came amongst news of other big-budget investments and deals—American Airlines and U.S. Airways merging for $11 billion, for example, or Michael Dell deciding to buy up Dell. We’re barely at March, but already U.S. companies have planned over $219 billion in mergers, the Huffington Post reports. Compare that number to last year’s $85 billion around the same time of year. It’s likely that low rates of interest combined with high corporate profits are conducive to such blockbuster deals.

According to Heinz, the sale will help the company’s growth, and the deal ought to be wrapped up in Q3. Heinz’s shares were up 20% following the announcement of the acquisition, while Berkshire Hathaway, too, saw its Class A shares rise 1 percent.

The Huffington Post reports that Berkshire would be paying $12.12 billion for half equity shares in Heinz, plus $8 billion in preferred shares paying 9 percent. 3G Capital will run the ketchup company with Berkshire as the financing partner.

Heinz is famed for ketchup, but the company actually has expanded to include a range of products internationally—ABC soy sauce in Indonesia, Quero tomato sauces in Brazil, Complan nutritional foods in India, and, through its 2010 acquisition of Foodstar, the Master brand of soy sauces and fermented bean curds in China.

Heinz remains an iconic brand and, despite the deal, will remain headquartered in Pittsburgh. No details concerning management changes or any other adjustments have been revealed so far.

Berkshire Hathaway is clearly itching for big deals. Last year in a CNBC interview Buffett disclosed that the company is basically sitting on $47 billion in cash. Thus far, the company’s largest single acquisition has been its 2010 buyout of the BNSF railroad for $26.3 billion.

One thing that’s interesting about this Heinz business is that Berkshire typically buys companies whole, for the most part allowing them to continue their operations more or less as they were doing anyway. Sometimes Berkshire has helped finance deals, but it isn’t the norm.

Shareholders of Heinz stand to receive $72.50 per common stock share. The price for the total deal is a 20 percent premium over Heinz’s previous closing stock price of $60.48, and the deal was approved unanimously.