Markets

Kraft Heinz falls after second-largest shareholder 3G Capital sells more than 25 million shares

Key Points
  • Private equity firm 3G Capital Partners discloses that it sold 25.1 million shares of Kraft Heinz at $28.44 per share.
  • The move brings 3G's stake down by about 9%.
  • The stock cratered nearly 25% in February after Kraft Heinz wrote down $15.4 billion on two of its most iconic brands, Kraft and Oscar Mayer.
  • The Brazilian private equity firm is Kraft Heinz's second largest shareholder, after Warren Buffett's Berkshire Hathaway.
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3G Capital sells over 25 million shares of Kraft Heinz

The second-largest investor in Kraft Heinz Company disclosed that it has again trimmed its stake in the food company.

Private equity firm 3G Capital Partners said Monday it sold 25.1 million shares at a price of $28.44 per share, bringing its stake down by about 9% to 245 million shares.

The Brazilian private equity giant founded by Jorge Paulo Lemann is the company's second largest shareholder, after Warren Buffett's Berkshire Hathaway. After the sale, 3G Capital still has 20% ownership of Kraft Heinz. The stock was down 4% Tuesday afternoon.

In a separate filing Monday, Lemann disclosed that he increased his personal holding of Kraft Heinz stock by approximately $100 million. The 3G sale was also sparked by periodic liquidity windows by 3G investors in the fund that holds Kraft Heinz stock and the private equity fund has no current intention to sell any additional shares, a spokesman for Kraft Heinz told CNBC.

Still, the latest disclosure by 3G comes amid a string of brand write-downs and financial woes at the packaged food giant.

The stock crated nearly 25% in February after Kraft Heinz wrote down $15.4 billion on two of its most iconic brands, Kraft and Oscar Mayer. It also cut its dividend by 36% to 40 cents at the time and announced it had received a subpoena from the Securities and Exchange Commission on its accounting policies and internal mechanics in 2018.

Last month, it sank to a new all-time low after it again delayed the filing of its financial results and wrote down the value of its business by an additional $1.22 billion.

The struggling performance also represent a rare loss for the bargain-hunting Buffett and Berkshire, who partnered with Brazil's 3G capital in the Kraft Heinz merger.

Shares of Kraft Heinz hit a record low on Aug. 28 and remain down more than 31% in 2019 and about 50% over the last 12 months. By early August, Berkshire had lost almost $5 billion this year on its investment.

3G Capital gained a successful reputation on Wall Street for scaling back costs through strict budgeting, layoffs and other changes at the companies it invests in or acquires. The firm bought Heinz in 2013 and merged it with Kraft in 2015. But that strategy hit a snag with a large consumer products company like Kraft, which is seeing a big competitive threat from a trend for fresher and healthier foods. Some investors believe 3G will be unable to revive Kraft through cost-cutting alone and may need to invest more to compete in this environment.

Despite speculation that tensions were mounting between Buffett and 3G Capital, the so-called Oracle of Omaha told CNBC in June that such reports were wrong and that Lemann was still "a good friend."

"I made a mistake in the Kraft purchase in terms of paying too much," Buffett said at the time, adding that the write-down of the Kraft and Oscar Meyer brands was an acknowledgement of that.

Buffett stepped down from the Kraft Heinz board in 2018, but Berkshire Vice Chairman Greg Abel remains on the board and has been actively involved, Buffett said in June.

3G Capital reported a similar sale as this one in August 2018, when it sold 20.6 million shares at a price of $59.85.

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