Kraft Heinz Co. (KHC) has announced that it plans to split into two companies, reversing much of the $46 billion U.S. merger it undertook a decade ago.
Currently one of the largest food companies in the world, Kraft Heinz said the first of the two new companies, which are not yet named, will focus on sauces, spreads and seasonings such as Heinz ketchup, Philadelphia cream cheese, and Kraft macaroni and cheese.
Kraft Heinz said the first company will have annual sales of about $15 billion U.S. and approximately 75% of those sales would come from sauces, spreads and seasonings.
Kraft Heinz said the second company will include items such as Oscar Mayer hot dogs, Kraft cheese singles, and Lunchables. That company will have $10 billion U.S. in annual sales.
The split effectively ends the deal that created Kraft Heinz in 2015. The merger was largely the idea of Warren Buffett’s Berkshire Hathaway (BRK.A / BRK.B).
While investors originally cheered the merger, the reality was disappointing as the combined company’s U.S. sales declined over time.
In 2019, Kraft Heinz disclosed that it had received a subpoena from the U.S. Securities and Exchange Commission (SEC) related to its accounting practices and internal controls.
The company also cut its dividend by 36% and took a $15.4 billion U.S. write down on Kraft and Oscar Mayer, two of its biggest brands.
More recently, Kraft Heinz has begun divesting some of its businesses, selling off most of its cheese unit to French dairy giant Lactalis and its nuts division, including the Planters brand.
Despite the changes, shares of Kraft Heinz have declined 60% since the merger in 2015. KHC stock is currently trading at $27.97 U.S. per share, having declined 21% in the last 12 months.
Famed investor Warren Buffett has said that Berkshire Hathaway overpaid for Kraft Heinz stock and expressed regret at the merger.
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