The Kraft Heinz lawsuit aims at the transfer of 3G shares, the depreciation, a SEC investigation


By Jonathan Stempel

(Reuters) – Kraft Heinz Co faces a new lawsuit. Why, the majority shareholder, 3G Capital, has transferred $ 1.23 billion of stock six months before the processed food company knocks out investors with a huge depreciation and other bad news .

The proposed class action lawsuit released Wednesday is among the first charges of Kraft Heinz, whose other major shareholder, Berkshire Hathaway Inc., of Warren Buffett, has cheated his shareholders about his business prospects.

Kraft Heinz's stock price fell 27.5% on Feb. 22, after the company canceled a $ 15.4 billion mark off its Kraft and Oscar Mayer brands and Canadian assets consumers opting for healthier and cooler products or private label products.

The company, headquartered in Chicago and Pittsburgh, also reduced its dividend and announced an accounting inquiry with the US Securities and Exchange Commission. The fall in Kraft Heinz shares has erased more than $ 16 billion in market value.

In his suit for damages, shareholder Steve Walling accused Kraft Heinz, Bernardo Hees, general manager of 3G, and others, of concealing damage to Kraft Heinz's iconic brands. and their internal controls, including the 3G belt tightener.

Walling also said the defendants had been "motivated" to behave inappropriately to allow 3G to "sell" $ 1.23 billion of stock last August at artificially inflated prices. The complaint was filed in the federal court of Pittsburgh.

In a regulatory filing dated Aug. 7, 3G said that a subsidiary had transferred 20.63 million Kraft Heinz shares worth $ 59.83 each to an entity called HK3 18 LP.

The Brazilian private equity firm said that none of the shares sold was related to Kraft Heinz's initial stake in its 3G partners.

Hees told Reuters in an interview on Sept. 7, 2018, that the transfer had been made on behalf of institutional investors having a "window on liquidity" and coming out of a 3G fund.

"It's not 3G, as we know 3G," he said. "We are very optimistic about the profile of what this investment can be in the long term."

Kraft Heinz and 3G did not immediately respond to requests for comments on Thursday. Robbins Geller Rudman & Dowd, a law firm representing Walling, has not responded to similar requests.

Berkshire and Buffett are not accused. Buffett told CNBC on Monday that the market reacted "probably quite appropriately" to Kraft Heinz's news.

Shareholder lawsuits are common after unexpected bad news has affected the stock price of a company. They are often combined into a single lawsuit near the company.

The case is the Walling affair against Kraft Heinz Co et al., US District Court, Western District of Pennsylvania, No. 19-00214.

(Report by Melissa Fares, Trevor Hunnicutt and Jonathan Stempel in New York, edited by Marguerita Choy)

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