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'Morgan and Trian and Heinz, Oh My!'

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PITTSBURGH (–H.J. Heinz Co., in the midst of exchanging charges with Nelson Peltz’s hedge fund, Trian Fund Management LP, New York, issued a terse reply to a JP Morgan food-industry analyst, Pablo Zuanic.

Mr. Zuanic contended, in a report released Thursday [July 13], that Mr. Peltz’s proxy fight, an effort to put up to five people on the board of directors at the annual meeting next month, will fail. He also said that the stock price is overvalued, because the market is too optimistic about the dissidents’ prospects.

He said that the company could have trouble either raising prices or cutting costs, and as a result it may miss its earnings guidance by at least 40 cents a share in the current fiscal year.

Heinz reacted immediately with a statement: “Contrary to the speculation by a JP Morgan analyst today, Heinz remains well on track for its growth and financial targets in this fiscal year and very confidently stands by its June 1 guidance.” It also said that it began the process of mailing its definitive proxy statement, and its white proxy card, July 10 [Monday].

Its proxy statement said that total shareholder return has outpaced that of the relevant peer group. The S&P packaged food group returned 16% between Dec. 20, 2002, and Feb. 3, 2006. Heinz returned 18.9% during the same period. The company said that it is using those dates as benchmarks because in December 2002 it spun off Del Monte, and because February of this year saw the start of the “activist involvement in Heinz stock.”

The company nominees for the five seats at issue are

?? 1/2 Charles E. Bunch, chairman and chief executive of PPG Industries;

?? 1/2 Mary C. Choksi, managing director of Strategic Investment Partners;

?? 1/2 Peter Coors, chairman of Coors Brewing Co.;

?? 1/2 John G. Drosdick, chairman and chief executive of Sunoco; and

?? 1/2 Dennis H. Reilley, chairman and chief executive of Praxair.

The board has 12 members, and the terms aren’t staggered, so all members are up for reelection, but Trian only contests those five seats. Its candidates are: Mr. Peltz, Peter W. May, Edward P. Garden, Greg Norman, and Michael F. Weinstein.

In its proxy statement, the Trian group contends that it owns approximately 5.5% of Heinz’s shares, and “We invested in Heinz because it is a valuable franchise, with an exceptional group of ‘power’ brands that has, unfortunately, been very poorly managed under its current ?? 1/2 chief executive officer, William R. Johnson.” Since Mr. Johnson became chief executive in 1998, the proxy states, Heinz’s stock price has declined more than 38%.

The Trian group includes Sandell Asset Management Corp., New York, an investment management firm owned and operated by Thomas E. Sandell, who focuses on event-driven opportunities worldwide.

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Contact Bob Keane with questions or comments at [email protected].


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