Sometimes an investment looks so terrible even Warren Buffett can’t fix it. Kraft Heinz, the maker of sauces and convenience foods, is poised to break itself up after years of faltering sales and a falling share price. It’s a forlorn attempt to placate shareholders who could have done much better elsewhere. Buffett has metaphorical ketchup down his shirt, but his own investors have, relative to others in Kraft, come out on top.
Buffett’s investment company Berkshire Hathaway bought Heinz in 2013, in a co-investment with private equity firm 3G Capital. The two then made a bid for the listed Kraft Foods in 2015, emerging with half of the resulting mayo-to-macaroni-cheese maker. It didn’t go down well. After painful asset writedowns and profit warnings, 3G eventually sold its shares. Buffett stayed put, admitting he overpaid.
Zoom in on the numbers, though, and Buffett did better than one might expect. Berkshire Hathaway paid $4.3bn for its stake in Heinz. More cash added during the merger with Kraft took the total to $9.8bn. Today, its 27 per cent stake in Kraft Heinz is worth $8.8bn. But Buffett’s firm has also received about $6.3bn of dividends, Lex calculates. So in total, he is up nearly 60 per cent on his ordinary shares.