Berkshire Hathaway may exit Kraft Heinz after a decade, signalling the end of a high-profile but underperforming investment.
Summary:
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Berkshire may sell its entire 27.5% stake in Kraft Heinz.
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Kraft Heinz filed a prospectus enabling a potential resale.
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Shares fell nearly 5% in after-hours trading.
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Berkshire has written down the investment twice since 2019.
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A sale would end a decade-long, underperforming investment.
Berkshire Hathaway may be preparing to unwind its long-standing investment in Kraft Heinz, after a regulatory filing indicated that the conglomerate could sell its entire 27.5% stake in the packaged food group.
Kraft Heinz on Tuesday filed a prospectus supplement with the U.S. Securities and Exchange Commission to register the potential resale of Berkshire’s 325.4 million shares. While the filing does not confirm that a sale is imminent, it enables Berkshire to dispose of its holding, which is currently valued at around $7.7bn based on Tuesday’s closing price.
The disclosure weighed on sentiment, with Kraft Heinz shares falling nearly 5% in after-hours trading following the filing.
Reuters adds:
Berkshire is the company’s largest shareholder and helped engineer the 2015 merger between Kraft Foods and H.J. Heinz alongside Brazilian private equity group 3G Capital. That deal, once touted as a model for scale-driven efficiencies, has since been widely viewed as a disappointment. 3G Capital exited its stake in 2023, while Berkshire has remained invested despite mounting challenges.
The combined company has struggled with years of aggressive cost-cutting, underinvestment in brands and product innovation, and intensifying competition from private-label and health-focused alternatives. Slowing sales across the US food sector, as consumers push back against price increases, have further pressured performance. Kraft Heinz has been among the weakest performers in the packaged food space.
Berkshire has already acknowledged the investment’s shortcomings through substantial write-downs, including a $3bn impairment in 2019 and a further $3.76bn charge recorded in August. Warren Buffett has previously described the deal as a mistake, citing overly optimistic assumptions about the durability of brand power.
The filing comes ahead of a planned breakup of Kraft Heinz later this year, a move that both Buffett and Berkshire chief executive Greg Abel publicly opposed when it was announced. Kraft Heinz installed Steve Cahillane as chief executive on January 1, the same day Abel formally assumed the top role at Berkshire.
While Kraft Heinz said it remains focused on maximising long-term shareholder value, the prospect of a Berkshire exit would mark the end of one of the conglomerate’s most high-profile and least successful investments of the past decade.
This article was written by Eamonn Sheridan at investinglive.com.