BRK.B Berkshire Hathaway Inc

By Nicole Friedman 

Shares in Berkshire Hathaway Inc. fell nearly 2% Friday, ahead of the company's fourth-quarter earnings report Saturday morning, dragged down by the disclosure of a multibillion-dollar write-down at Kraft Heinz Co.

Warren Buffett's company owns more than a quarter of Kraft Heinz, which means the write-down will likely affect Berkshire's profits directly. Barclays, for instance, on Friday slashed its quarterly operating-earnings forecast for Berkshire to $1,726 from $3,522 per A share.

The ties between Berkshire and Kraft Heinz go back several years, and Mr. Buffett has defended the packaged-food company's strategy in the face of criticism. The write-down, which led Kraft's stock to tumble 27.5% Friday, represents a rare black eye for the legendary investor.

Berkshire didn't respond to a request for comment.

Berkshire first teamed up with Brazilian private-equity firm 3G Capital to buy H.J. Heinz Co. in 2013. The two companies partnered again to finance Heinz's 2015 merger with Kraft Foods Group Inc.

Kraft Heinz made a $143 billion offer to buy Unilever PLC in early 2017, which would have been financed with $15 billion each from Berkshire and 3G, Mr. Buffett has said, but the approach was rebuffed. Mr. Buffett has long declined to make hostile bids.

Berkshire valued its 26.7% investment in Kraft Heinz stock at $17.6 billion at the end of 2017, up from $15.3 billion a year earlier.

Kraft Heinz contributed $2.9 billion to Berkshire's net earnings in 2017. Mr. Buffett praised Kraft Heinz at his company's annual meeting in May.

Mr. Buffett retired from Kraft Heinz's board last year as he decreased his travel commitments.

Two Berkshire employees remain on Kraft Heinz's board: Greg Abel, vice chairman for noninsurance business operations and one of two candidates to succeed Mr. Buffett as chief executive, and Tracy Britt Cool, CEO of Berkshire subsidiary Pampered Chef and Mr. Buffett's former financial assistant.

Mr. Buffett has long faced criticism for his association with 3G, which employs aggressive cost-cutting strategies that some Berkshire shareholders find distasteful. Unlike 3G, Berkshire is known for letting its companies set their own strategies and rarely doing big layoffs.

Mr. Buffett has argued that Berkshire buys companies that already run efficiently, while 3G pursues strategy changes at inefficient businesses.

"The people at 3G are great, great managers," Mr. Buffett said at Berkshire's 2018 annual meeting. "We are their partners and delighted to be their partners."

Write to Nicole Friedman at nicole.friedman@wsj.com

(END) Dow Jones Newswires

February 22, 2019 17:58 ET (22:58 GMT)

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