Berkshire Hathaway may sell off some or all of its $7.8B stake in Kraft Heinz, according to a filing with the SEC late Tuesday. The prospectus notes that Berkshire, which received the Kraft Heinz equity through the 2015 merger of Kraft and Heinz, has the potential to “offer to sell from time to time” its equity stake. Berkshire currently owns 27.5% of Kraft Heinz, or 325.4 million shares.
Kraft Heinz shares are trading lower after market hours. Shares have dropped nearly 5% to $22.59, lower than their 52-week low, due to the uncertainty surrounding the potential sale of a portion or the entirety of Berkshire’s equity stake. Kraft Heinz shares, like a number of other food-related companies, have lost roughly 20% over the past year, with a 66% overall decrease in share price during the last ten years, which has placed Kraft Heinz among the worst-performing stocks in the food sector.
Potential future sales of Kraft Heinz shares by Berkshire may reflect the discontent of Warren Buffett regarding Kraft Heinz’s future direction, as Buffet indicated upon the announcement of Kraft Heinz’s plans to become two entities, one being the higher growth brands like Heinz and Philadelphia, and the other being lower growth brands such as Lunchables, Oscar Mayer, and Maxwell House.
After the separation’s announcement, Buffet stated he was disappointed in the news and that he couldn’t see any way the Kraft-Heinz merger could have potentially turned into a successful investment. With a current value of approximately $7.8 billion versus an original investment of $9.8 billion, Kraft Heinz hasn’t performed well for Berkshire Hathaway compared to other investments.
Buffett originally stated the amount invested in Kraft Heinz in his letters to shareholders in 2015. Berkshire owned approximately half of Heinz and took it private through the Brazilian investment firm 3G Capital in 2013. The merger between Kraft Foods and Heinz was partly engineered by Buffett. 3G has sold their stake in Kraft Heinz; Berkshire has not sold any of the shares owned in Kraft Heinz since the merger.
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The fear that Berkshire will sell all or a part of their stake in Kraft Heinz has kept the market price for Kraft Heinz low because there will be too many shares in circulation relative to demand. If Berkshire does start to sell out of its Kraft Heinz shares, it will most likely force down the price of Kraft Heinz shares due to the increase in available floating shares in the market.
When shareholders have a shareholding above 10% in any company and sell any shares of that company, they are required to disclose all information regarding their sale to the SEC within two business days. Like most large institutional shareholders, Berkshire prefers not to disclose its ownership or sales activity publicly and tries to maintain their holdings below 10% for this reason.
Kraft Heinz shares are trading at a very low price point of less than 10 times the anticipated 2026 earnings and have nearly a 7% yield on the dividend. When Kraft Heinz announced that it would split into two separate entities, it emphasized that the combined dividends would equal the current dividend payment.
