Bloomberg News

Berkshire’s Abel, Britt Join Heinz Board After Swann Leaves (1)

June 21, 2013

Gregory Abel and Tracy Britt, two of Warren Buffett’s deputies who have been adding responsibilities at Berkshire Hathaway Inc. (A:US), were selected by the billionaire to join him as directors of HJ Heinz Co.

Jorge Paulo Lemann, whose 3G Capital bought the ketchup maker this month with Berkshire for $28.8 billion, also is on the board with two representatives of his firm, Alexandre Behring and Marcel Herrmann Telles, according to a regulatory filing last week. They replaced directors including Lynn Swann, the former wide receiver for the National Football League’s Pittsburgh Steelers.

The board oversees Chief Executive Officer Bernardo Hees, who announced a management shakeup yesterday, including the departure of Heinz’s North America CEO David Moran. Britt is chairman of at least two Berkshire units that replaced their CEOs last year, and Abel has been building the company’s energy business through acquisitions.

“For Greg Abel, it broadens his exposure, and it certainly now raises the question, ‘Is he high up on Warren Buffett’s list’” for succession, said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business, who has accompanied students to meet the billionaire.

Buffett, 82, is preparing the company he built over more than four decades for an eventual leadership (2FA:US) transition. He has said his roles could be split among the next CEO; his son Howard, who could serve as non-executive chairman; and investment managers Todd Combs and Ted Weschler.

Holding Company

Monitoring Berkshire’s stake in Heinz may fall to the next CEO. Buffett’s company and 3G each paid about $4 billion for half of the equity in a new holding company for the ketchup maker. Berkshire committed an additional $8 billion for a preferred stake that pays a 9 percent dividend and has the option of adding an additional 5 percent of the holding company.

Buffett has said 3G is taking operating responsibility for Heinz. Lemann’s firm already had made management changes at the ketchup maker before yesterday, naming Hees as CEO and Paulo Basilio as chief financial officer. They replaced William Johnson, Heinz’s CEO of 15 years, and former CFO Art Winkleblack who stepped down when the deal was completed June 7.

Heinz said 11 other executives were leaving yesterday, while naming 10 managers to the senior leadership team alongside Hees and Basilio. Most were previously at the ketchup maker. Andy Keatings, the chief quality officer who has worked at Heinz since 1994, will have a “dotted-line reporting relationship” to the board (HNZ:US) chairman, according to the statement.

Legal Standard

Heinz didn’t specify what role the directors will play. There’s no different legal standard that applies to public versus private company directors, said John Sorkin, a New York-based partner at Fried Frank Harris Shriver & Jacobson LLP who specializes in cross-border mergers and acquisitions, leverage buyouts and corporate governance work.

“It’s all situational,” he said, while declining to comment specifically on Heinz or its directors.

Britt, a graduate of Harvard Business School, is among the youngest executives at Omaha, Nebraska-based Berkshire. Last year, she was named to Forbes’s list of 30 top finance executives under 30 years old.

“Being young is not a disqualification,” said Sorkin. “You can be young, incredibly talented and bring an incredible amount value to a board.”

In addition to serving as Buffett’s financial assistant, she’s chairman of four of the company’s subsidiaries, including paintmaker Benjamin Moore and Johns Manville, which produces building supplies. Both units replaced their CEOs last year.

Near Abdication

“She takes care of all kinds of things that come up,” Buffett said of Britt last month at an event held by Fortune magazine in Omaha, where Berkshire is based. “These four companies, they are her responsibility.”

Buffett oversees most of Berkshire’s more than 80 operating units, including railroad Burlington Northern Santa Fe and auto insurer Geico. Managers at the businesses make most day-to-day decisions at their operations, freeing time for Buffett to hunt for acquisitions (2FA:US) and make investments (2FA:US). He has quipped that his role is to “delegate almost to the point of abdication.”

The Heinz post will give Britt “more experience at a pretty high level,” said Jeff Matthews, a Berkshire shareholder and author of books about the company. Abel may prove useful if the new owners of Heinz use it as a platform for further buyouts, he said. Over the past two decades, he’s helped build MidAmerican Energy Holdings Co. through acquisitions and last month agreed to buy a Nevada utility for $5.6 billion.

“Abel brings more of the real world, day-to-day experience of buying and integrating a major acquisition than probably anyone else at Berkshire Hathaway,” Matthews said.

Super Bowl

A member of the Pro Football Hall of Fame Class of 2001, Swann, 61, played with the Steelers from 1974 to 1982. The team won four championships in that span, and Swann was the most valuable player of Super Bowl X following the 1975 season.

The president of the Swann Inc. marketing and consulting firm since 1976, Swann became a Heinz director in 2003 and is on the board of casino operator Caesars Entertainment Corp. (CZR:US) He ran as a Republican for Pennsylvania governor in 2006 and lost to incumbent Democrat Ed Rendell.

Britt and Buffett didn’t respond to a request for comment sent to Buffett’s assistant. Abel declined to comment through Abby Bottenfield, a spokeswoman for MidAmerican. Swann declined to comment through a spokeswoman at Swann Inc. The board changes previously were reported by the Pittsburgh Post-Gazette.

Burgers, Beer

Lemann, Brazil’s richest man, helps control Anheuser-Busch InBev NV with Telles and Carlos Alberto Sicupira. They took over fast-food chain Burger King Holdings Inc. in 2010. Behring is a managing partner at New York-based 3G.

Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, said directors of private companies typically hold less sway than board members of public corporations, especially when they disagree with the owners.

“Boards in that situation are really more like icing on the cake,” he said. “If you don’t do what they say, you get replaced.”

To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net


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