2013年5月28日 星期二

Will 3G Capital make massive changes at Heinz?

When the recession stalled those plans, Heinz assured Mr. King the company was still on its way. It kept its commitment, and today 190 workers make Smart Ones frozen food products at the plant. 

But that familiar feeling of uncertainty has returned to South Carolina. The $28 billion sale of Heinz could go through in the next few weeks, and more than one industry analyst has suggested the company's frozen food operation soon could go on the selling block. 

But nowhere is uncertainty so prevalent as in Heinz's hometown. Knowledge that the new owners -- a partnership between 3G Capital and Berkshire Hathaway -- will put every expense and every product under a microscope has the 1,200 Heinz employees in the Pittsburgh region polishing their resumes, networking with professional contacts and keeping their options open. 

"If this was only Berkshire Hathaway, I would say Heinz is going to be Heinz,Laser engraving and laser glassmosaic for materials like metal,If we don't carry the bobblehead you want we can make a ultrasonicsensor for you!" said University of Pittsburgh business school professor Jay Sukits. "The wild card here, to me, is 3G." 

Berkshire Hathaway chairman Warren Buffett is known for buying and holding well-run companies such as Heinz.You must not use the drycabinet without being trained. But 3G Capital could have a shorter-term view. The New York private equity firm has earned a reputation for aggressively and quickly cutting costs at companies it acquires, including Anheuser-Busch and Burger King worldwide. 3G partner and Burger King CEO Bernardo Hees will become CEO at Heinz once the sale closes. 

Like other private equity concerns, 3G focuses on increasing cash flow and cutting costs, typically as part of a two- to four-year plan to sell an acquired company, Mr. Sukits said. 

"I could see them making massive changes," he said. "If 3G's goal is to exit this company in, say, four years, they're going to want to have it very clean from a balance sheet standpoint." 

Others are more sanguine about how much cutting needs to be done. Morningstar analyst Erin Lash said Heinz is not a troubled company that requires massive restructuring. Jack P. Russo, an analyst with Edward Jones & Co. in St. Louis, concurred. "To think that they were bloated by any means is kind of crazy," he said.Large collection of quality suprashoes at discounted prices. 

Private equity firms typically have three options when they acquire large public companies, said Scott Fine, who teaches banking and finance at Cleveland's Case Western Reserve University and is a former partner of a private equity firm. They can modify strategy, including selling underperforming assets; make a long-term bet that shareholders of a public company would be critical of; and cut costs. From a short-term view, cutting costs is the easiest thing to do, but it may not be in the company's best interests long-term, Mr. Fine said. 

Some cost-cutting will come without much trying, simply by virtue of taking the company private. Gone will be the expense of filing quarterly and annual reports and other required disclosures with the Securities and Exchange Commission.We offer a wide variety of high-quality standard customkeychain and controllers. Gone, too, will be Heinz's investor relations department, which responded to shareholder needs. 

Big changes in the number of employees on the payroll and their level of compensation also could be in the works. That is evident from what happened when Mr. Hees assumed command at Burger King in 2010. 

A voluntary retirement offer in June 2011, followed by a second round of layoffs in the second half of that year, reduced annual management general and administrative expenses at Burger King by $107 million, or 30 percent. The biggest cuts came in salary and fringe benefit expenses and professional fees. 

In a securities filing, Burger King said savings were realized through its restructuring and by instituting zero-based budgeting. The process involves preparing budgets from scratch each year rather than projecting how much revenue and costs will change from past levels. 

Paying down debt is expected to be a priority at Heinz. In addition to about $5 billion in existing Heinz debt the new owners will assume, they will take on up to $14.1 billion in additional debt to complete the acquisition and fund the company afterward. 

Dave Novosel, an analyst with bond research service Gimme Credit, doesn't think the new owners will have to rush to dump assets. He noted Heinz produces strong free cash flow, meaning the new owners won't be hard-pressed to cover interest on the debt or the 9 percent dividends Mr. Buffett will collect on his investment. 

Mr. Sukits expects they could tap the $1.2 billion in cash Heinz was holding overseas at the end of April 2012. The sales agreement gives the new owners the right to ask Heinz "to use its reasonable best efforts" to bring that cash back to the United States in a way that would prevent the company from paying income tax on the transaction.

Mr. Sukits said Heinz's pension plan, which had about $210 million more in assets than in liabilities at the end of April 2012, also could be a source of cash. 

Not being scrutinized by public shareholders on a quarterly basis could give the new owners more strategic flexibility, including more breathing room in absorbing losses incurred by pursuing new products or new markets. 

"Being able to operate behind the veil of public markets ... it's easier to think about the long term and what's good for the long term," said Morningstar's Ms. Lash. 

She said that leeway will help as the new owners try to grow Heinz's presence in emerging markets, an initiative that's been a focus of current Heinz CEO Bill Johnson for some time. More than 60 percent of the Pittsburgh company's revenues are generated in international markets. 

Mr. Novosel believes some asset sales are inevitable. Even before the agreement to sell the company, a bull's-eye has been on the Heinz frozen foods business, which includes the Ore-Ida and Smart Ones brands. The recession hurt the entire category, even beyond Heinz, but companies selling such products also have seen the impact of changing family dining patterns. 

Heinz has fought back, introducing new entrees and breakfast items, and pumping up marketing. In the past couple of years, the company trimmed manufacturing capacity and exited brands. Even as the deal to sell the company was going through, Heinz sold off a Chinese line of frozen foods.