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Warren Buffett says Berkshire overpaid for Kraft Heinz



(Reuters) – Warren Buffett said Monday that his Berkshire Hathaway Inc. paid off in the merger in 2015, which created Kraft Heinz Co., but he had no plans to escape from the struggling packaged food business.

Mr. Buffett spoke four days after Kraft Heinz said it had taken down a $ 15.4 billion write-down for his Kraft and Oscar Mayer brands and other assets, lowered the dividend, and that the US Securities and Exchange Commission investigated its accounts.

The Force Heinz share price fell 27.5% on Friday, which was due to Berkshire losing $ 4.3 billion on its stake. Berkshire owns 26.7% of Kraft Heinz. The shares rose 0.7% to $ 35.21 in early trading on Monday.

"I was wrong in a couple of ways at Kraft Heinz," Buffett said on CNBC television. "We overpaid for Kraft."

The comments were a rare erroneous recognition of the 88-year-old billionaire on a major investment in his congress in Omaha, Nebraska.

Berkshire and the Brazilian 3G Capital had gathered in 201

5 to combine the former Kraft Foods with their HJ Heinz, and together hold about half of the merged company.

Mr. Buffett also said he had "no intention whatsoever" to add or subtract from Berkshire's efforts and to continue doing business with 3G and its co-founder Jorge Paulo Lemann, calling him "an absolutely outstanding human being". [19659002] "Toe to toe"

Kraft Heinz's information raised questions about 3G's financial strategy for the company, whose brands include Jell-O, Kool-Aid and Philadelphia cream cheese, and if not clear consumers looking for healthier, fresher alternatives to processed foods.

Mr. Buffett acknowledged the changes, but the increased pressure comes from dealers like Amazon.com Inc., Walmart Inc. and Costco Wholesale Corp., including the latter Kirkland brand.

Stronger brands can "go toe to toe with Walmart or Costco," but weaker brands "tend to lose," Buffett says. "Capacity has changed, and it's huge."

Berkshire's own $ 3 billion write-down related to Kraft Heinz contributed a net loss of $ 25.39 billion for the fourth quarter for Omaha, Nebraska-based Berkshire.

"He monetically overpaid for Power," said Doug Kass, founder of the hedge fund Seabreeze Partners Management Inc. "He increasingly saw in his investments in his investments."

Mr. Buffett said he learned about the SEC probe about seven to ten days before being announced.

Greg Abel, a vice president of Berkshire, was widely regarded as a candidate to succeed Mr Buffett as Berkshire's chief executive, sitting on Kraft Heinz's board. 19659002] 3G Strategy

The announcement also challenged 3G's signature-based budgeting model, which requires managers to limit their expenditure annually from the outset and not use last year as a guide or pursue cost savings on an ongoing basis.

Kraft Heinz belt tension resulted in more than $ 1.7 billion in annual savings, including the loss of thousands of jobs, reflecting 3G's similar efforts at such companies as Anheuser-Busch InBev and Tim Hortons. 19659002] While the strategy has resulted in narrower companies, it can be a recurrence if companies lack products that people want or have failed to spend enough to develop and market these products.

Mr. Buffett said he did not believe 3G under-invested in Kraft Heinz. Berkshire is not involved in the daily business.


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