Warren Buffett: Berkshire Overpaid For Kraft Heinz


On Monday, Warren Buffett said that Berkshire Hathaway Inc overpaid in the 2015 merger deal that created Kraft Heinz Co, however, he said that he had no plans to leave the troubled packaged foods firm.

The remarks of Buffett come four days after Kraft Heinz took a $15.4 billion (11.8 billion pounds) writedown for its Oscar Mayer and Kraft brands and other assets, reduced its dividend, and said that the Securities and Exchange Commission of the United States was scrutinising its accounting.

Last Friday, the share price of Kraft Heinz plunged by 27.5 percent. It wiped out more than $16 billion off its market value and caused Berkshire to lose $4.3 billion on its stake. Berkshire owns 26.7 percent of Kraft Heinz.

In an interview with CNBC television, Buffet stated: “I was wrong in a couple of ways on Kraft Heinz.”

He added: “We overpaid for Kraft.”

Buffett did not disclose by how much Berkshire overpaid, however, he said that the market reacted “probably quite properly” to the news.

He also said that he has “absolutely no intention” of adding to or subtracting from the stake of Berkshire in Kraft Heinz. He said that the firm had “very, very strong” brands and that he would still be happy to own it 10 years from now.

His comments were considered as a rare admission of error by the 88-year-old billionaire on a major investment at his Omaha, Nebraska-based conglomerate.

Berkshire and 3G Capital, a Brazilian private equity company, combined the former Kraft Foods with H.J. Heinz, which they acquired in 2013, and own approximately half of the merged firm.

Buffett said that he may have learned regarding the SEC probe seven to 10 days before its announcement.

A Berkshire vice chairman who is widely considered a candidate to succeed Buffett as the chief executive officer of Berkshire, Greg Abel, is a Kraft Heinz director.

Buffett also said that he would continue to do business with 3G and Jorge Paulo Lemann, its co-founder. He called him “an absolutely outstanding human being.”