3G Capital Dumps 9% of Kraft Heinz Stake

Companies and Brands

Published: September 17, 2019 10:35 am

Last Updated: January 30, 2020 3:44 pm

Shares of Kraft Heinz Co. (NYSE: KHC) dipped about 4% in Tuesday’s premarket following reports that Brazilian private equity firm 3G Capital sold 25.1 million shares in the food processing giant. The sale amounts to about 9% of 3G’s total stake in Kraft Heinz and leaves the private equity firm with a stake of around 20%.

With its remaining stake of around 245 million shares, 3G is the second-largest shareholder in Kraft Heinz behind Warren Buffett’s Berkshire Hathaway Inc. (NYSE: BRK-A), which holds more than 325 million shares.

One might be forgiven for asking what took 3G so long? In February, Kraft Heinz wrote down more than $15 billion in intangible assets, and the share price, which had been tracking closely with the S&P 500, fell off a cliff. As of Monday’s close, Kraft Heinz shares are down 34% for the year, while the S&P 500 index is up close to 20%.

At the same time as 3G’s sale, the firm’s founder, Jorge Paulo Lemann, personally acquired about $100 million worth of additional shares in Kraft Heinz.

Berkshire Hathaway’s stake in Kraft Heinz has cost Buffett’s company about $5 billion so far this year, according to CNBC. Buffet has stuck with the company, however, because he is a big believer in dividend-paying firms.

In 2015, when Kraft and Heinz completed their merger, Heinz had been privately held by 3G Capital and Berkshire Hathaway since 2011. The two firms paid a total of $11 billion for Heinz. Berkshire Hathaway had acquired a total stake of 52.5% in Heinz. Kraft shareholders held 49% of the merged company’s stock and received a special dividend of $16.50 that was funded by 3G and Berkshire Hathaway.

Buffett acknowledged in February that he paid too much for Kraft. That hasn’t become any less true in the past couple of days.

Kraft Heinz traded down about 3.7% early in Tuesday’s regular trading session. The stock’s 52-week range is $24.86 to $58.08, and the 12-month price target is $28.39.