Kraft Heinz break-up plans could revive interest in Australia sale

Since Kraft and Heinz merged in 2015, the stock has fallen more than 60 per cent. Picture: Daniel Acker/The Wall Street Journal

A move by Chicago-based Kraft Heinz to embark on a break-up may lead to the business again exploring a sale of its Australia and New Zealand operation.

DataRoom reported that the global food manufacturing giant had a sale process under way for its Australian and New Zealand operations two years ago, but the sale was suspended after flooding in its manufacturing facilities across the Tasman in Hastings.

At that time, the business was expected to sell for about $1bn in a process under way by investment bank UBS. Kohlberg Kravis Roberts and Pacific Equity Partners had explored a possible purchase at the time.

Heinz is behind brands such as Heinz soups and sauces, Golden Circle juices and tinned foods, Weight Watchers and Philadelphia cream cheese.

The Wall Street Journal reported at the weekend that the business that has been backed over time by Warren Buffett’s Berkshire Hathaway wanted to spin off a major part of its grocery business, including many Kraft products into a new entity that could be valued at as much as $US20bn ($30.5bn) 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 has given priority to its faster-growing offerings such as hot sauces, dressings and condiments, which are more in line with consumer preferences than processed lunch meats and cheeses.

It hopes the two separate units would be in total worth more than Kraft Heinz’s roughly $US31bn market value.

While a split could be finalised in the coming weeks, Kraft Heinz had discussed other scenarios with its advisers and its board had not signed off on a final decision.

Since Kraft and Heinz merged in 2015, the stock has fallen more than 60 per cent and more than $US57bn in value has been shed.

Big food companies are facing a reckoning as inflation-weary consumers baulk at sharply higher grocery prices, hunt for deals and switch to store-brand goods.

Heightened government scrutiny over processed food, the rise of weight-loss drugs and growing consumer preferences for fresher, healthier fare are compounding the challenges.

Privately-held Mars last summer signed a roughly $US30bn deal for Kellanova, a spin-out of Kellogg that houses snacks such as Pringles. Kellogg’s remaining and slower-growing North American cereal business, renamed WK Kellogg, struck a deal last week to be sold to Italy’s Ferrero for about $US3bn.

Additional reporting: The Wall Street Journal