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Don't let Mr. Buffett take this business from us! Vote no!! Heinz (NYSE:HNZ) ketchup is one of the greatest consumer products in history.

Mr. Buffett is paying roughly 13.9 times EBITDA for this business ($28 billion), but only if we let him take it from us! Not only that, I'm certain Mr. Buffett has a plan to recoup his investment as soon as possible.

Among the most likely options is to borrow about $5 billion in cheap debt in an leveraged buyout (LBO) transaction. Including the roughly $5 billion in debt the company is presently carrying on it's books, that brings total debt to $10 billion, and Mr. Buffett and his partners will put in around $18 billion cash.

Using a hypothetical example for simplicity, if the group borrows the entire $10 billion at 4% on a 30 year fixed rate, that equates to roughly $575 million per year in debt service, leaving roughly $1.4 billion a year for Mr. Buffett and his partners pre-tax.

LBO buyers have a history of shrewd cost cutting, and Mr. Buffett has a history of raising prices for products after he acquires a company. Heinz fits this retro playbook strategy perfectly.

Mr. Buffett will look especially astute in an inflationary environment. We've seen this movie before. Buffett fans will recall the See's Candies acquisition in 1972 as described in the book, "The Snowball," by Alice Schroeder, where Mr. Buffett raised prices incessantly throughout the 70's and 80's.

If the Buffett led investor group can successfully cut cost and raise prices, they are likely to get there money back in about 10 years, or less. That's right, in a decade they could get repaid all of their cash and own Heinz ketchup!

If the deal doesn't go through, I expect that we will lose the deal premium and potentially even more as there could be leveraged speculators in the stock who have to get out at any price. If we can buy HNZ with a 4% yield again, it would be a good opportunity to own a great business.

If the company is well managed, we will recover the small premium Mr. Buffett is offering, through dividends alone, within the next five years.

In an inflationary environment, HNZ will be able to raise prices and boost dividends, allowing us to recover the premium even sooner. According to divdata.com HNZ was paying $.28 per share in 1984 and less than 30 years later HNZ is paying $2.08. Growing payments to shareholders roughly 7.5 times during a relatively benign period for inflation rates.

What's more important is that we, the shareholders, continue to own this wonderful business! A business that can potentially keep paying us increasing dividends indefinitely into the future. In twenty years, wouldn't you rather have $5.00 for every $1 you are receiving today in HNZ dividends versus a 20 cent premium today?

After paying taxes, investors will be left with even less to reinvest. Investors in the top tax bracket will have little more than $15 to reinvest.

Heinz ketchup is a product that in all likelihood the world will be consuming more of in twenty years than it does today and at higher prices per unit sold.

Even at the proposed purchase price of $72.50, HNZ is paying us a nearly 3% annual yield. Where can we replace this outstanding investment? Why would we sell it? If you are an owner of HNZ, Vote No!!

Source: Heinz, Reject Buffett's Offer