TSX runs higher on rate cut expectations
Investing.com -- Kraft Heinz Co (NASDAQ:KHC) is preparing to break itself up, a move that would effectively reverse its 2015 merger, according to a report by The Wall Street Journal citing people familiar with the matter. A formal announcement could come as early as next week, though the timing and scope of the deal are still subject to change.
The company is expected to spin off much of its grocery portfolio, including signature Kraft-branded products, into a standalone business possibly valued at up to $20 billion. The remaining operations would center on Kraft Heinz’s powerhouse condiments and sauces portfolio, including Heinz ketchup and Grey Poupon mustard.
In July, the Journal first reported that Kraft Heinz was evaluating a potential spinoff aimed at unlocking value by streamlining its portfolio. Later that month, the company said it was continuing to assess strategic options but noted there was “no guarantee that any transaction will occur.”
Such a move would unwind much of the strategy behind the 2015 merger crafted by Warren Buffett’s Berkshire Hathaway and Brazilian private-equity firm 3G Capital. While the deal created one of the largest food companies in North America, cost-cutting failed to deliver sustained growth amid changing consumer tastes.
The stock rose more than 2% on Tuesday following reports of the potential breakup, reflecting investor optimism about the prospect of a streamlined business model. A split could provide greater focus for each division and offer more targeted capital allocation strategies.
The breakup would follow a broader industry shift, with several food conglomerates opting to separate underperforming or non-core assets. In 2023, Kellogg Company split into Kellanova, focused on snacks, and WK Kellogg, a legacy cereal business serving the U.S. market.
Likewise, Keurig Dr Pepper is in the process of reversing parts of its 2018 merger to streamline operations and improve operational focus. These moves highlight a growing skepticism toward mega-combinations once celebrated for their scale and efficiency.
For Kraft Heinz, the separation could offer investors clearer visibility into the performance and potential of its business segments. If finalized, the deal would mark a defining chapter in the ongoing transformation of one of America’s most iconic food makers.