Why Buffett’s Heinz deal won’t be his last

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On Thursday billionaire investor Warren Buffett teamed up with private equity firm 3G Capital to purchase food giant Heinz in a deal believed to be worth around $28 billion.

Does this mark the beginning of a new wave of M&A? Could it be the veteran investor's swansong? Citywire Global canvassed the investment community to find out.

Buffett disciple and Berkshire Hathaway investor Max Otte believes we could see more big deals coming from the sage of Omaha in the future as he still holds large amounts of cash.

The author of the 2006 book 'Der Crash kommt’ [The crash is coming] and fund manager has Buffett's investment house as his second biggest holding in his PI Global Value equity fund and does not believe the Heinz deal will be Buffett's last.

‘I don’t think this is his final deal – he’s in good health and still has cash to play with. He’s got $140 million of inflows coming into his fund on a monthly basis.’

‘Buffett has become so big that he can’t really invest freely in the market anymore. He can only purchase companies in full – he does private equity in the truest sense.’

‘He said himself that he won’t be getting the same kind of returns as in the past as due to his scale, he's not able to pick up the bargains he once did.’

‘Heinz definitely isn’t a bargain but I think he’s paying fair value for a company that suits his investment style in that it’s a stable company with a solid business model,' added Otte. 'It’s a better investment than keeping high cash levels.’

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Following news of the deal, its share price soared by almost 20% from $60.48 on Wednesday to $72.50 on Thursday.

Heinz holder

US stock picker Till Budelmann told Citywire Global he is looking to cash in on core holding Heinz following the news of Buffett’s widely-reported move for the food giant.

The Zurich-based fund manager said he had been adding to an existing position in Heinz in his $60 million Berenberg Sys A US Stockpicker fund due to a perceived undervaluation.

Budelmann said the systematic models which underpin the investment process for his mixed asset fund will more than likely lead to him closing his 4% position in Heinz when he rebalances the portfolio next week.

‘Our investment is based on the systematic approach I and a number of my colleagues developed and so, I would say, it is up to the model whether we decided to sell out of it or not.’

‘But since we have identified an undervaluation in the stock over the last couple of weeks and added to it, and given the fact the stock has risen 20% over the course of Thursday alone, realistically we will sell the stock but we have to wait and see when the model is reappraised next week.’

The Berenberg Sys.A US Stockpicker fund has returned 29.68% in US dollar terms in the three years to the end of January 2013. This is while its benchmark, the LCI Mixed Asset USD Aggressive, has risen 17.67%.