Insider Trading Suspected in Heinz Buyout

by Christopher Freeburn | February 20, 2013 9:51 am

[1]Anomalous trading of H.J. Heinz (NYSE:HNZ[2]) shares just one day before the company announced that it was being taken private by a partnership between Warren Buffett’s Berkshire Hathaway (NYSE:BRK.A[3], BRK.B[4]) and a Brazilian private equity firm has sparked a federal investigation[5].

On Tuesday, the FBI said that it was probing “highly suspicious” trades made before the deal was announced and indicated that it was working with the Securities and Exchange Commission (SEC) to discover if laws were broken. The SEC has already moved to freeze a Switzerland-based trading account with Goldman Sachs (NYSE:GS[6]) that was used to purchase Heinz options whose value rocketed after the deal was announced, the Washington Post noted.

The identifies of the traders remains unknown. The SEC indicated that it moved quickly to freeze the account to prevent the traders from withdrawing their funds before the investigation was finished.

An SEC spokesman noted that “irregular” trading prior to a major merger raised red flags for the agency. Goldman Sachs is not accused of any wrong-doing and is reportedly working with SEC investigators.

Both Berkshire Hathaway and 3G Capital, the Brazilian firm involved in the Heinz acquisition, declined to comment on the investigation. The acquisition of the iconic ketchup-maker is valued at about $28 billion[7], including debt.

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