Berkshire set to exit 28% stake in Kraft Heinz after rare Buffett blunder

Berkshire HathawayNew CEO Greg Abel has taken a formal step toward correcting a rare misstep by Warren Buffett in office.

The holding company, which owns GEICO insurance and BNSF Railway, registered its entire 27.5 percent share. Kraft Heinz One filing This paves the way for Berkshire to exit its position in the hot dog and macaroni maker. Berkshire is Kraft Heinz’s largest shareholder.

Shares of Kraft Heinz fell 5% in premarket trading following the news.

The move underscores Abel’s willingness to move on from a deal that has long stood out as a rare blemish on Buffett’s record in other stories. Kraft Heinz shares have lost nearly 70 percent of their value since the 2015 merger that created the ketchup giant; has been weighed down by changing consumer tastes, rising costs and slow growth in core brands. Some of the losses have been offset by billions of dollars in dividends over the years, but last year Berkshire still lost $3.8 billion in value on the value of its holding.

The latest filing also comes as Kraft Heinz is trying to split into two companies: one focusing on sauces, spreads and shelf-stable meals, while the second includes North American staples like Oscar Mayer meats, Kraft cheese singles and Lunchables.

Buffett himself acknowledged his disappointment that the merger he orchestrated a decade ago ultimately unraveled.

“Bringing them together certainly hasn’t been a great idea, but I don’t think breaking them up is going to solve the problem,” Buffett, who remains Berkshire’s chairman, told CNBC last year.

The registration statement gives Berkshire flexibility to reduce the position rather than signaling an imminent sell, according to Stifel.

“The registration provides Berkshire Hathaway with the ability to reduce its ownership interest; we believe transaction notifications are not required outside of quarterly 13F filings,” Stifel analysts wrote. he wrote. “The next update will likely occur in mid-May, when Berkshire reports its first fiscal quarter activity.”

Stifel reiterated Kraft Heinz rating and $26 price target; He suggested that consumption trends in the U.S. are softer and slower growth in emerging markets could delay any revenue growth even as the company continues to generate strong cash flow.

In 2015, Berkshire teamed up with Brazilian private equity firm 3G Capital to merge Kraft Foods with HJ Heinz. 3G Capital quietly exited its Kraft Heinz investment in 2023 after periodically reducing its stake for years as the combined company struggled.