Famed investor Warren Buffett has commented on the news that Kraft Heinz Co. (KHC) plans to split into two separate companies, saying he’s “disappointed” by the breakup.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
Buffett’s comments matter because he was the person who orchestrated the blockbuster $46 billion merger that created Kraft Heinz a decade ago. The split now unwinds much of that deal. Also, with a 27.5% stake in the company, Berkshire Hathaway is Kraft Heinz’s largest shareholder. Buffett hasn’t touched his KHC shares since the 2015 merger was completed.
The stock of Kraft Heinz fell 5% after Buffett expressed his disappointment to CNBC, saying that while the merger he envisioned never materialized, he doesn’t think that breaking the company into two will fix its problems. Buffett has said previously that his holding company Berkshire Hathaway (BRK.B) overpaid for KHC stock, which has fallen more than 60% in the last 10 years.
A Litany of Problems
To his credit, Buffett has held onto his Kraft Heinz stake even as other investors dumped their shares as the company faced a litany of problems after the merger. Even now, with the company splitting in two, Buffett told CNBC that he will do whatever is in the best interest of Kraft Heinz and its shareholders.
The problems Kraft Heinz has faced include a subpoena from the U.S. Securities and Exchange Commission (SEC) related to its accounting practices. Management slashed the company’s dividend by 36% after taking a $15.4 billion write-down on its Kraft and Oscar Mayer brands. And Kraft Heinz has divested many of its businesses, including its cheese unit and nuts division.
Is KHC Stock a Buy?
The stock of Kraft Heinz has a consensus Hold rating among 16 Wall Street analysts. That rating is based on 14 Hold and two Sell recommendations issued in the last three months. The average KHC price target of $29.67 implies 8.78% upside from current levels.
