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Chatters about a breakup at consumer giant Kraft Heinz are spurring speculation among Wall Street analysts that its largest institutional investor Berkshire Hathaway may start dumping the underperforming stock. The Wall Street Journal reported Friday that Kraft Heinz may split its grocery business, including many Kraft products, into a new entity valued at up to $20 billion. Such a split, which would leave the company with products such as its namesake Heinz ketchup, could be finalized in the next few weeks, the Journal reported. “As announced in May, Kraft Heinz has been evaluating potential strategic transactions to unlock shareholder value,” a spokesperson at Kraft Heinz told CNBC. “Beyond that, we do not comment on rumors or speculation.” The news came after two Berkshire executives, Timothy Kenesey and Alicia Knapp, resigned as directors from Kraft Heinz’s board in May. The exit made it easier for Berkshire to sell shares as it would no longer be subject to any trading restrictions imposed on board members. In light of the breakup rumors at Kraft Heinz, some analysts are highlighting the increased risk of Berkshire selling the stock. “In the near term we still have the concern about whether Berkshire Hathaway will continue to hold onto their 28% stake in the overall company as all this plays out,” Bernstein said in a note to clients. Barclays raised the question if Berkshire’s decision to exit the board was a reflection of a difference of opinion regarding strategic direction. Berkshire owns about 27% of Kraft Heinz, its eighth-biggest equity holding as of the end of March. “With Berkshire Hathaway no longer holding its two seats on the board, this opens up the path for future changes at the company that they otherwise may have objected to,” JPMorgan said. In 2013, Buffett teamed with Brazilian private equity company 3G Capital to acquire cash-flush, strong global brand Heinz. The billionaire CEO later worked with 3G to help finance Heinz’s $49 billion merger with Kraft Foods Group in 2015. KHC ALL mountain Kraft Heinz since 2015 The stock has been a laggard for Berkshire, however. Since its peak of $62 in 2015, shares of Kraft Heinz have been cut more than half to trade around $27 apiece. In 2019, Buffett told CNBC his conglomerate paid too much for Kraft, noting he might have misjudged certain aspects about the company. “I was wrong in a couple of ways about Kraft Heinz,” Buffett tells CNBC. “We overpaid for Kraft.” Buffett said he did not overpay for Heinz, however.
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