Feb 20 - Jeffrey Goldfarb and Breakingviews columnists discuss why the $28 billion acquisition of Heinz by Berkshire Hathaway and 3G Capital could take a long time to deliver.
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We are still digesting yet when he billion dollar -- deal -- -- -- there. And and -- is how to look at it there's there's some questions we're kind of cracks in the numbers try to figure out the long term value here because there's a lot of debt involved in this deal. Warren Buffett and three G capital and you kind of look at -- there and where are they gonna make any money. One of the things to us look at this as maybe not a typical private equity where you're at its five year horizon when it was turned things around them. Panic the public -- -- thought. Whereas -- -- the Berkshire and you look at you the man behind -- is while they. Have a longer term right. But it rarely exits any any news that some investments. Executed by. When I as a business that they're -- not -- make -- -- she denies that the devils behind. -- As it now toys have been different networks took it starts when he used to build and to and also banker gets here in Brazil as well they were uninteresting people in the it's. Senate like a good track record of staying at Lowell and getting good value attitude they're they're gonna in need to do that this. Then when things have been as -- now via we're talking about six times. Leveraged writes I mean so it's gonna take on it is a couple things that they -- is cut costs this is within hours ago it -- Hide behind this sort of considered a relative not mean the budget they've they've -- cut exactly and there are along that spectrum and. I think to make this work they're gonna have to find -- do efficiencies as we. So I basically you know. And as soon like 7% cut over. Here because it's a certain amount of cost cutting proposals he's -- growth. It was a day that you're -- indicates -- we look back and intellectually grow and of -- Austin hosting an apron -- corner opposite on average. We just -- but it's an awful so we take that forward and assume a degree of cost cuts and a lot of minutes and also very international growth expansion generally I have they have they have tightened some talent with associates and -- -- -- -- below -- including a lot of them -- -- another great -- was off at seven -- one dollar and right so it's illegal -- -- about 200 -- of -- -- you know buses both of -- -- even -- -- it's -- and it's really kind of dead. Sizzle would take munitions that we -- they cut costs and keep them low is that before the next he has. And maybe if they get some of an operating efficiencies. Say 20%. So that that income was 20% of revenue. And they grow revenue by -- opposite side. Then they're getting to may be a point when it in Dublin money forget that that's over -- -- -- -- attacks have continues we've with a book as being greedy region save you cash courier 5% increase efficiency 26% which. Knowing I read nobody else. Yeah that's elements that and -- that's that's something that unless a big you know continents -- Very basic -- new market right. But that exercises basically to play with the numbers to see you how they can do and what's what about a -- businesses and a deal for everybody -- with this particular grocers like you know. Exactly I think that's particularly to -- I think there's a lot of people are looking at these deals like its back you know LBOs are back again I think. This type of deal is very specific to you there's actually there's just no way am regularly financial guarantees in his. But the -- many of them like to get a dividend -- the insults -- debt that's when your main street festivals or going into this that we can do that aren't you we'll leave it there and I will be back with more breaking news tomorrow.