Warren Buffett said his Berkshire Hathaway Inc overpaid in the 2015 merger that created Kraft Heinz Co, but he had no plans to flee the struggling packaged foods company.
Buffett spoke four days after Kraft Heinz took a $15.4 billion writedown for its Kraft and Oscar Mayer brands and other assets, slashed its dividend, and told Reuters the U.S. Securities and Exchange Commission was probing its accounting.
Kraft Heinz’s share price sank 27.5 per cent on Friday, wiping out more than $16 billion of market value, and causing Berkshire to lose $4.3 billion on its stake. Berkshire owns 26.7 per cent of Kraft Heinz.
“I was wrong in a couple of ways on Kraft Heinz,” Buffett said on CNBC television. “We overpaid for Kraft.”
Buffett did not say by how much Berkshire overpaid, but told Reuters the market reacted “probably quite properly” to the news.
He also said he has “absolutely no intention” of adding to or subtracting from Berkshire’s stake in Kraft Heinz, saying the company had “very, very strong” brands and that he would be happy to own it a decade from now.
The comments were a rare admission of error by the 88-year-old billionaire on a major investment at his Omaha, Nebraska-based conglomerate.
Berkshire and Brazilian private equity firm 3G Capital combined the former Kraft Foods with H.J. Heinz, which they bought in 2013, and own about half of the merged company.
Buffett said he may have learned about the SEC probe seven to 10 days before it was announced.
Greg Abel, a Berkshire vice chairman widely considered a candidate to succeed Buffett as Berkshire’s chief executive officer, is a Kraft Heinz director.
(Reuters)
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