Kraft Heinz to Split, Warren Buffett‘s Berkshire Hathaway Holds Steady Amid disappointment
CHICAGO – Kraft Heinz announced plans to separate into two independent public companies, one focused on its iconic brands and teh other on its fast-growing international business, sending its shares up approximately six percent as mid-July. the move comes as a potential disappointment to Warren Buffett’s Berkshire Hathaway, Kraft Heinz’s largest shareholder wiht a 27.5 percent stake acquired during the 2015 merger that created the food conglomerate, and has been welcomed by some analysts.
The split reflects a broader trend of companies streamlining operations to unlock value, but also signals a shift in strategy after years of sluggish growth. The decision impacts investors, employees of both resulting companies, and the competitive landscape of the global food industry. The separation is expected to allow investors to more directly invest in the segments of the business they prefer - a stable, dividend-paying North American food business or a higher-growth international operation.
Buffett, who is set to retire at age 94, has maintained Berkshire Hathaway’s position in Kraft Heinz since the initial merger, despite underperformance. The company’s managers,however,have advocated for the division,a position supported by some economic analysts.”The division is a good step,” said Kim Forrest, analyst at Bokeh Capital Partners. “It will allow investors to choose what they will invest in. some people want a more stable type of business and higher dividends. And they will be a food business.”
According to a recent JP Morgan analysis, companies that underwent similar separations before the Covid-19 pandemic saw their valuations increase by roughly 10 percent compared to their parent companies. However, post-pandemic, the average valuation of divided companies has decreased by five percent.
