Big Play Of Warren Buffett And 3G Capital For Kraft Heinz
Krupa Global Investments, as shareholders of Kraft Heinz, feel that Warren Buffett and 3G Capital are starting an interesting maneuver around KHC.
We see huge parallel here between AmTrust and Kraft Heinz.
We think that this is finally an opportunity for a potential win-win scenario for Buffett, 3G, and Kraft Heinz investors.
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Krupa Global Investments, as shareholders of Kraft Heinz (NASDAQ: KHC), feel that Warren Buffett and 3G Capital are starting an interesting maneuver around KHC. The Q4 results release was a nightmare for investors with $15 Billion written down, a dividend cut, weaker EBITA outlook for 2019, plus an announcement about an SEC investigation. 3G Capital, who run Kraft Heinz, likely knew this information would take a significant hit on Kraft Heinz's stock, yet, they did not in any way lay the groundwork for the release of said information in previous releases or investor events. There was no profit warning, their statements during the Q3 2018 earnings release were mainly positive regarding their outlook and they said they did not believe additional marketing and other costs will occur in Q4.
Based on our experience, this procedure is typical when management and the largest shareholders want to take a company private at a higher valuation. KHC management, led by 3G, did the obvious thing during the Q4 earnings call: they cleared the table completely. This enables Kraft Heinz to look attractive at a more modest valuation. After a 30% reduction in share price, a buyout that investors may have balked at just a month ago now sounds great. After the significant reduction in share price, paying a 15-30% premium over market prices in a going-private deal would likely be acceptable for investors such as Warren Buffett and 3G Capital. Bloomberg reporters Craig Giammona and Katherine Chiglinsky had similar conclusions about the next steps at Kraft Heinz based on their conversations with their sources:
We are not new to these types of maneuvers. We experienced this same type of behavior in our previous dealings with AmTrust Financial Services, a mid-cap NYC based insurance company.