Kraft Heinz Nears Big Breakup
Transaction to split grocery and sauces could be announced as soon as next week
Kraft Heinz is nearing a plan to break up the company, reversing the 2015 Kraft and Heinz merger.
The split could result in one entity with Kraft products and another with sauces and spreads like Heinz ketchup.
Kraft Heinz KHC 2.18%increase; green up pointing triangle is closing in on a plan to break itself up, according to people familiar with the matter.
The decision would effectively undo much of the work done from the infamous merger of Kraft and Heinz in 2015, a deal orchestrated by Warren Buffett and Brazilian private-equity firm 3G Capital Partners.
A transaction could be announced as soon as early next week, the people said, cautioning the plans and timing could still change at the last minute.
The Wall Street Journal reported in July that Kraft was planning to spin off a large chunk of its grocery business, including many Kraft products, into a new entity that could be valued at as much as $20 billion on its own. That would leave a company housing goods such as sauces and spreads like Heinz’s namesake ketchup and Dijon mustard brand Grey Poupon.
The company is betting that two separate units would be in total worth more than Kraft Heinz’s roughly $33 billion market value. Shares are up since the Journal’s report in July.
Other details around the pending breakup couldn’t be learned.
Kraft has lately been giving priority to its faster-growing offerings like hot sauces, dressings and condiments, which are more in line with consumer preferences today than processed lunch meats and cheeses.
Kraft Heinz said later in July it was still evaluating potential strategic transactions aimed at boosting shareholder value. The company emphasized that there’s no guarantee any changes or deals will materialize.
“Our board is working with urgency on our evaluation of those strategic options,” Chief Executive Carlos Abrams-Rivera said.
The split would come as corporate breakups are coming more regularly in the food and beverage industry.
Kellogg in 2023 split into two companies, a snacks behemoth named Kellanova and a North American cereal business called WK Kellogg. Keurig Dr Pepper is unwinding a 2018 transaction that had united a coffee maker and beverage company under the same roof.
In a hunt for growth, big food and beverage companies are being forced to re-evaluate their portfolios and come up with other ways to excite investors, including through big deals.