Citing an unnamed source who was briefed on the matter, The New York Times reported Friday that the Securities and Exchange Commission is looking at “unusual trading” surrounding the deal for Heinz to be purchased by Warren Buffett’s Berkshire Hathaway and 3G Capital, an investment firm that also recently bought Burger King. The report said regulators first noticed a suspicious spike in trading on Wednesday.
A spokeswoman for the SEC, Christina D’Amico, said the agency does not confirm or deny the existence of investigations. Representatives for Heinz, Berkshire Hathaway and the public relations agency representing 3G and Berkshire in the deal did not immediately return messages for comment.
In announcing the deal, Heinz said the company planned to remain in Pittsburgh and that the move would help it continue its transformation into a global business more quickly. In addition to ketchup, the company makes Classico pasta sauces and Ore-Ida potatoes, as well as a growing stable of sauces suited to regional tastes around the world.
Heinz employs about 1,200 in Ohio, including an undisclosed number in Mason.
The New York Times report noted that options trading in Heinz soared this week before the deal was announced Thursday morning. Call options let investors can place a bet on a stock without committing to buy the shares. Investors instead have the option to buy the shares later for a set price.
The report noted that the SEC often opens inquiries into trading activity after major deals without bringing charges later on. Heinz and the buyers haven’t been accused of any wrongdoing.
The year has been shaping up to be a promising one for mergers. U.S. mergers total $219 billion year-to-date, which is the fastest start to a year since 2000, according to Dealogic. At the same time last year, mergers had totaled just $85 billion.
Globally, merger activity has been tepid since 2007 when there were $4.6 trillion in deals. Last year’s total was $2.7 trillion.
One of the reasons activity is picking up is that financing deals is cheap, with interest rates near record lows. Companies are also sitting on piles of cash, with those in the Standard and Poor’s 500 index holding nearly $1 trillion on their books.
Another reason to buy? After years of slashing expenses and squeezing more work out of remaining staff, companies are struggling to grow earnings.
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