Is Warren Buffett being left holding the can at the underperforming food giant Kraft Heinz after his erstwhile Brazilian-based partner sold more of its stake at less than market value on Monday?
Shares of the troubled food company fell 4% on Tuesday after it reported that its second-largest investor, private equity firm 3G Capital, sold more than 25 million shares on Monday.
Kraft Heinz revealed the sale in an SEC filing that disclosed 3G sold the shares at a price of $US28.44 on Monday, 4% below its closing price of $US29.62. 3G still holds a 20% stake.
3G sold 20.6 million shares in Kraft back in August 2018 at a price of $US59.85.
This week’s sale price was, therefore, more than 50% lower than that price indicating the losses 3G (and Buffett) are taking on their Kraft play.
That price under market is always a sign of a major shareholder wanting to make a quick exit.
Buffett’s Berkshire Hathaway still gold a 26.7% stake and remains the largest shareholder in the food company that has endured a miserable 2019 so far with over $US15 billion in asset write-downs and losses.
The shares plunged nearly 25% in February after Kraft Heinz wrote down $US15.4 billion on two of its best-known brands, Kraft and Oscar Mayer.
It also cut its dividend by 36% to 40 US cents at the time and announced it had received a subpoena from the Securities and Exchange Commission about its accounting policies and internal mechanics in 2018. Another subpoena from the SEC has been received about different accounting issues.
3G founder by Jorge Paulo Lemann though says he had lifted his stake in the food company by around $US100 million.
Kraft Heinz shares hit a record low on August 28 and remain down more than 31% in 2019 and about 50% over the last 12 months.
Berkshire Hathaway is down around $US5 billion on its investment in Kraft Heinz.
Buffett has acknowledged a mistake with the Kraft deal. He said in June: “I made a mistake in the Kraft purchase in terms of paying too much.” adding that the write-down of the Kraft and Oscar Meyer brands was an acknowledgment of that.
Buffett stepped down from the Kraft Heinz board in 2018, but Berkshire Vice Chairman Greg Abel remains on the board and has been actively involved, Buffett said in June.