Trading Room home page

US investigating trading in Heinz deal

Market watch top headlines

Australian reports

World reports

Stocks to watch

AGK, AGO, API, BLY, LEI, OSH, TLS,

DPA

2013-02-16

US regulators want to know whether traders were given insider information before investors Warren Buffett and Jorge Paulo Lemann announced their plan to buy HJ Heinz for $US23 billion ($A22.33 billion) this week, a report says.

The deal would see Buffett's Berkshire Hathaway investment company spend about $US12 billion to $US13 billion to buy the maker of Heinz tomato ketchup. Lemann's investment would be made through his 3G Capital private investment fund, according to the terms of the deal.

The Securities and Exchange Commission (SEC), which regulates US stock markets, is looking into whether traders were tipped off early on the news that Heinz would be bought and used the information to profit, The New York Times reported.

An SEC spokeswoman said the agency had no comment. She said its standard policy is not to comment on investigations.

The deal, announced on Thursday, is being called the largest ever in the food industry. The buyers' bid was $US72.50 a share, a 20 per cent premium over Wednesday's closing price of $US60.48.

But if the preliminary inquiry turns into a broader investigation, it could cast a shadow over the transaction, the newspaper reported. It would also be place Buffett in a bad light. The 82-year-old is said to place a high value on integrity.

Insider trading is illegal because trades based on confidential information disadvantages other investors.

The inquiry is expected to look into options trading in Heinz shares. As of Tuesday, there was little activity in Heinz options. But, by Wednesday, as the deal was being finalised, options trading jumped, data from Bloomberg shows.

3G Capital was linked to possible insider trading last year when the SEC froze the assets of a banker in September. The banker had been involved in 3G Capital's acquisition of Burger King in 2010. The insider tip was believed to have been received by a business partner of 3G Capital. No charges were made against the investor himself.