UPDATE 3-Heinz to buy 80 pct stake in Brazil food maker

Thu Mar 3, 2011 8:48am EST

Related Topics

* Deal to close in next several months

* Business to double Heinz's LatAm sales in 1st full year

* Deal modestly dilutes earnings in '12, adds in '13

* Shares up 1.6 percent in premarket trading (Adds deal value, sales, analysts' estimates, share activity, analyst comment; changes dateline, previous DETROIT)

NEW YORK, March 3 (Reuters) - H.J. Heinz Co HNZ.N plans to buy an 80 percent stake in a Brazilian food company for an undisclosed amount, establishing its first major business in Latin America's biggest country.

Heinz plans to buy the stake in Coniexpress S.A. Industrias Alimenticias, maker of the Quero brand of tomato-based sauces, tomato paste, ketchup, condiments and vegetables.

Officials at the unlisted Brazilian company, which has annual sales of about $325 million, were not immediately available to comment.

Heinz said on Thursday it expects to close on its purchase in the next several months. The company declined to provide any financial details, but Brazilian newspaper Valor Economico said the deal was worth 1.2 billion reais ($720 million), citing unnamed sources.

Heinz shares rose 1.6 percent in premarket trading.

The deal will roughly double Heinz's sales in Latin America in the first full year, Heinz Chief Executive William Johnson said in a statement, pointing to the country's 200 million people.

"Brazil has been on our priority list for some time because it generates about 45 percent of Latin America's gross domestic product and is one of the fastest growing economies in the world," he added.

Heinz expects the Quero deal to modestly hurt earnings in fiscal 2012, but add to earnings in 2013.

Stifel Nicolaus analyst Christopher Growe affirmed his "buy" rating on Heinz shares, saying the company's growth in sales and earnings continues to foster upside for the shares from this level.

EMERGING MARKET BOOST

Valor Economic said under the deal's terms, about 200 million reais out of the 1.2 billion will be set aside for five years to pay labor and tax liabilities that could come up. The paper added that after five years, whatever remains from the 200 million reais would be transferred to Quero's current owners while the remaining 20 percent share in the company would go to Heinz.

The company expects emerging markets to generate more than 20 percent of its total sales in fiscal 2012, which begins on April 28.

Heinz said the Quero brand holds the No. 1 or No. 2 positions in numerous tomato-based categories in Brazil and the leading position in vegetables. Heinz expects to expand the business, which employs almost 1,800 people, into larger supermarkets and commercial outlets.

Heinz also posted earnings of 84 cents a share for its fiscal third quarter. Analysts on average had been expecting 82 cents per share, according to Thomson Reuters I/B/E/S, even though Heinz said last week that it expected its profit to be 84 cents. Before that, analysts expected 80 cents. [ID:nN24229436]

In the quarter ended Jan. 26, sales rose to $2.72 billion, topping analysts' average estimate of $2.71 billion.

Johnson also said last week that there were a lot of acquisition opportunities in emerging markets and that the biggest problem was prioritizing them. [ID:nN24229436]

Heinz shares rose to $49.75 in premarket trade from their close of $48.98 on Wednesday on the New York Stock Exchange. (Reporting by Ben Klayman in Detroit, Martinne Geller in New York and Inae Riveras in ; Editing by Derek Caney, Dave Zimmerman)

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