Warren Buffett’s Biggest Mistake: Kraft Heinz

Warren Buffett and his Berkshire Hathaway investment firm have made few missteps in their 60 years of investing. The 2015 merger of Kraft with Heinz is probably his biggest mistake.

“It certainly didn’t turn out to be a brilliant idea to put them together, but I don’t think taking them apart will fix it,” Buffett told CNBC this week after Kraft Heinz announced it was splitting into two companies next year.

The Oracle of Omaha said he is opposed to the split but also sounded like there was nothing Berkshire Hathaway could do about it – despite his firm being by far the largest investor in the Pittsburgh-Chicago based food company, owning 27.5% of the stock.

Presuming Berkshire put as much cash into the two deals as its partner 3G Capital did, Berkshire spent about $19 billion to now own just over a quarter of a company currently valued at about $30 billion. Do the math.

Berkshire Hathaway and Brazilian investment fund 3G Capital engineered the merger in 2015, two years after they together bought H.J. Heinz Co. and took it private. Merging with publicly traded Kraft Foods was an easy way to make the stock public.

The two firms paid $28 billion for Heinz and apparently paid Kraft shareholders $10 billion in cash, in addition to adding Heinz’s equity to Kraft’s stock. 3G and Berkshire took a 51% stake in the combined business, while existing Kraft shareholders held onto 49%. All told, the deal was estimated to be valued at nearly $50 billion.

3G Capital sold all its holdings in Kraft Heinz, last estimated at 16%, in 2023.

An interesting footnote: Kraft Heinz in 2017 reportedly made a $143 billion bid for much-larger Unilever, which apparently was rejected and went nowhere fast.

Kraft and/or Heinz probably is/are the biggest mistake(s) in Buffett’s outrageously successful investing career – the guy’s reportedly worth $150 billion, making him the ninth richest person in the world. That career is coming to a close at the end of this year.

Now 94, Buffett recently announced he’ll retire as the head of Berkshire Hathaway by the end of 2025. His successor, Greg Abel, reportedly doesn’t like the Kraft-Heinz split either, and it will happen on his watch next year.