Warren Buffett’s Berkshire Hathaway removed Kraft Heinz from the list of operating companies on its website earlier this year, weeks before writing down its investment in the food and beverage giant and leaving its board of directors.
The famed investor’s conglomerate took Kraft off its subsidiaries page in April, Business Insider determined using the Wayback Machine, a digital archive that stores snapshots of webpages on different dates.
Berkshire accounts for its roughly 27% stake in Kraft using the equity method, meaning Buffett and his colleagues recorded it at cost and periodically adjust its carrying value to reflect Berkshire’s share of Kraft’s profits and losses.
On May 19, Berkshire’s two board representatives stepped down. Berkshire also said in its second-quarter earnings that it was recording a $5 billion impairment loss on its Kraft position, cutting its carrying value to match its fair value of $8.4 billion.
Buffett and his team said they had considered their “ability and intent” to remain invested until the fair value exceeded carrying value, the “magnitude and duration” of the decline in fair value, and Kraft’s operating results and finances.
They also took into account the two board departures and the news that Kraft was evaluating potential strategic transactions, they said, and determined their unrealized loss on the holding was “other-than-temporary.”
It’s unclear whether Berkshire removed Kraft from its subsidiary list as part of a broader distancing from the investment. Kraft was an unusual entry in the first place, as the vast majority of businesses featured are wholly owned subsidiaries of Berkshire, such as Geico, See’s Candies, NetJets, and Pampered Chef.
Berkshire Hathaway and Kraft Heinz did not respond to requests for comment.
Berkshire’s Kraft Heinz saga
Arne Dedert/picture alliance via Getty Images
Kraft announced in September that it would split into two businesses, with one focused on sauces, spreads, and seasonings such as Heinz and Philadelphia, and the other focusing on North American staples, including Kraft Singles and Lunchables.
Berkshire partnered with 3G Capital, a Brazilian private equity firm, to acquire Heinz for around $23 billion in 2013. Two years later, the pair teamed up again to merge Heinz with Kraft in a $40 billion deal.
Since then, the combined company has navigated layoffs, management reshuffles, huge writedowns, asset sales, a slumping stock price, aggressive cost controls, a federal accounting probe, and a prolonged decline in net revenues fueled by changing consumer preferences.
David Kass, a finance professor at the University of Maryland and a longtime Berkshire blogger, told Business Insider in September that merging Kraft and Heinz was a “rare mistake” for Buffett.
The “Oracle of Omaha,” who spent the past six decades transforming Berkshire from a failing textile mill into a $1 trillion company, will step down as CEO next week. Buffett’s handpicked successor and Berkshire’s non-insurance chief, Greg Abel, will take the reins on New Year’s Day.
