Two Very Different Buyout Candidates for Berkshire Hathaway Inc. (BRK.A)

Any General Mills deal would likely be structured very similarly to Heinz. The company currently operates with significant financial leverage, having posted return on equity greater than 20% every year since 2006 with return on assets ranging between 6% and 7% during the period. General Mills is the kind of company built for a private equity-style, highly levered buyout with cheap debt financed at record low interest rates. The trailing P/E ratio of 16 indicates a good value, as General Mill’s (NYSE:GIS) earnings history reveals net income is consistent with free cash flows.

A combination of a high-quality brand and more than $1 billion of new free cash flows to Berkshire should make General Mills the ideal next target in the consumer staples space.

Buffett’s next deal will be big. Investors who can beat Buffett to the punch stand to earn big premiums when the Oracle comes in with a take private bid.

The article Two Very Different Buyout Candidates for Berkshire Hathaway originally appeared on Fool.com and is written by Jordan Wathen.

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