Kraft Heinz pauses Australia and New Zealand sale due to floods across the Tasman

Flooding has seen Kraft Heinz pause the sale of its Australia and New Zealand operations Photo: Zoe Devenport

Kraft Heinz is understood to have paused the sale process for its Australia and New Zealand operations due to the severe flooding across the Tasman.

Kraft Heinz owns the Watties food brand that manufactures products out of Hastings in the Hawke’s Bay.

The Hawke’s Bay was one of the worse affected parts of the North Island with Cyclone Gabrielle that drenched the region, causing more deaths and damage from the severe weather event than anywhere else in the country.

Compounding problems was severe power outages, a collapse in communication services and looting.

It is understood that the process has been placed on hold due to damage in the area where Kraft Heinz has its Watties operations.

Sources have told DataRoom that a sale process for the $1bn operations of Kraft Heinz in Australia and New Zealand has been quietly unfolding over recent weeks.

While groups such as Pacific Equity Partners has taken a look at the business, Kohlberg Kravis Roberts is considered the favourite to make an acquisition.

Originally, first-round offers were to be due before Christmas in a sale process run by UBS, but the time frame had been extended.

KKR’s ownership of Arnott’s Biscuits gives it compelling synergies where it can merge the companies and cut back office costs.

In 2019, KKR paid $US2.2bn for Arnott’s, a business run by George Zoghbi, who is a former Kraft Heinz executive and also on the Kraft Heinz board.

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

It has been exploring a sale of its Australian and New Zealand unit off and on over the past two or three years, sources say, as part of a decision to invest the capital closer to home.

Kraft Heinz, backed by Warren Buffett, is the world’s fifth-largest food and beverage company and generated $US6bn globally in adjusted earnings before interest, tax, depreciation and amortisation last year.

International sales, which exclude North America, fell 4 per cent, as the sales across the global business fell 5 per cent.

It expects net sales growth globally of 4 to 6 per cent for this year.

Kraft Heinz, which is backed by Warren Buffett, has also looked to sell assets elsewhere in recent years.