Berkshire Hathaway 2015 Annual Report Download - page 52

Notes to Consolidated Financial Statements (Continued)
(5) Other investments
Other investments include preferred stock of Wm. Wrigley Jr. Company (“Wrigley”), The Dow Chemical Company
(“Dow”) and Bank of America Corporation (“BAC”) warrants to purchase common stock of BAC and preferred and common
stock of Restaurant Brands International, Inc. (“RBI”). Other investments are classified as available-for-sale and carried at fair
value and are shown in our Consolidated Balance Sheets as follows (in millions).
Cost Fair Value
December 31, December 31,
2015 2014 2015 2014
Insurance and other ..................................................... $ 9,970 $ 9,970 $15,998 $16,346
Finance and financial products ............................................ 3,052 3,052 5,719 5,978
$13,022 $13,022 $21,717 $22,324
We own $2.1 billion liquidation amount of Wrigley preferred stock that was acquired in conjunction with the Mars
Incorporated (“Mars”) acquisition of Wrigley. The Wrigley preferred stock is entitled to dividends at 5% per annum and is
subject to certain put and call arrangements during 2016 for up to 50% of our original investment. Beginning in 2021, our then
outstanding investment will be subject to annual put and call arrangements. The redemption amounts under the put and call
arrangements will be based upon the earnings of Wrigley.
We own 3,000,000 shares of Series A Cumulative Convertible Perpetual Preferred Stock of Dow (“Dow Preferred”) with a
liquidation value of $1,000 per share. Each share of the Dow Preferred is convertible into 24.201 shares of Dow common stock
(equivalent to a conversion price of $41.32 per share). Dow currently has the option to cause some or all of the Dow Preferred to
be converted into Dow common stock at the then applicable conversion rate, if the New York Stock Exchange closing price of
its common stock exceeds $53.72 per share for any 20 trading days within a period of 30 consecutive trading days ending on the
day before Dow exercises its option. The Dow Preferred is entitled to dividends at a rate of 8.5% per annum.
We own 50,000 shares of 6% Non-Cumulative Perpetual Preferred Stock of BAC (“BAC Preferred”) with a liquidation
value of $100,000 per share and warrants to purchase 700,000,000 shares of common stock of BAC (“BAC Warrants”). The
BAC Preferred may be redeemed at the option of BAC beginning on May 7, 2019 at a redemption price of $105,000 per share
(or $5.25 billion in aggregate). The BAC Warrants expire in 2021 and are exercisable for an additional aggregate cost of $5
billion ($7.142857/share).
On December 12, 2014, we acquired Class A 9% Cumulative Compounding Perpetual Preferred Shares of RBI (“RBI
Preferred”) having a stated value of $3 billion and common stock of RBI for an aggregate cost of $3 billion. RBI, domiciled in
Canada, is the ultimate parent company of Burger King and Tim Hortons. As of the acquisition date, our combined investment
in RBI possessed approximately 14.4% of the voting interests of RBI. The RBI Preferred is entitled to dividends on a
cumulative basis of 9% per annum plus an additional amount, if necessary, to produce an after-tax yield to Berkshire as if the
dividends were paid by a U.S.-based company.
(6) Investments in The Kraft Heinz Company
On June 7, 2013, Berkshire and an affiliate of the global investment firm 3G Capital (such affiliate, “3G”), through a newly
formed holding company, H.J. Heinz Holding Corporation (“Heinz Holding”), acquired H.J. Heinz Company (“Heinz”).
Berkshire and 3G each made equity investments in Heinz Holding, which, together with debt financing obtained by Heinz
Holding, was used to acquire Heinz. Heinz is one of the world’s leading marketers and producers of healthy, convenient and
affordable foods specializing in ketchup, sauces, meals, soups, snacks and infant nutrition. Heinz is comprised of a global
family of leading branded products, including Heinz®Ketchup, sauces, soups, beans, pasta, infant foods, Ore-Ida®potato
products, Weight Watchers®Smart Ones®entrées and T.G.I. Friday’s®snacks.
Berkshire’s initial investments consisted of 425 million shares of Heinz Holding common stock, warrants, which were
exercised in June 2015, to acquire approximately 46 million additional shares of common stock at one cent per share, and
cumulative compounding preferred stock (“Preferred Stock”) with a liquidation preference of $8 billion. The aggregate cost of
these investments was $12.25 billion. 3G also acquired 425 million shares of Heinz Holding common stock for $4.25 billion. In
addition, Heinz Holding reserved 39.6 million shares of common stock for issuance to its management and directors under
equity grants, including stock options.
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