Power Heinz lawsuit case 3G stock transfer, writedown, SEC probe

By Jonathan Stempel

(Reuters) ̵[ads1]1; Kraft Heinz Co faces a new lawsuit asking why controlling shareholder 3G Capital transferred $ 1.23 billion in stock six months before the processed food company backed investors with a large write-down and other bad news. 19659003] The proposed complaint action, which was released on Wednesday, is among the first accusations Kraft Heinz, the second controlling shareholder, Warren Buffett's Berkshire Hathaway Inc, who has deceived shareholders about their business prospects.

Kraft Heinz's share price dropped 27.5 percent on February 22 after the company had written down $ 15.4 billion on its Kraft and Oscar Mayer brands and Canadian assets, as consumers switched to healthier and fresher alternatives or private label brands. products.

The company, headquartered in both Chicago and Pittsburgh, slashed its dividend and announced a US Securities and Exchange Commission accounting probe. Kraft Heinz's stock game erases more than $ 16 billion of market value.

In his injury case, shareholder Steve Walling accused Kraft Heinz, CEO Bernardo Hees, of 3G and others to conceal damage to Kraft Heinz's iconic brands and internal controls, including from 3G's signature belt tightening.

Walling also said that the defendants had been "motivated" to engage in unfair behavior so that 3G could "sell" NOK 1.23 billion in August in artificially inflated prices. The complaint was filed in the federal court in Pittsburgh.

In a register's filing of August 7, 3G said that an affiliate had transferred 20.63 million Kraft Heinz shares worth $ 59.83 each to a unit called HK3 18 LP.

The Brazilian private equity company said none of the shares sold related to the 3G partner's original Kraft Heinz stake.

Hees told Reuters in a September 7, 2018 interview that the transfer was made on behalf of institutional investors who had a "liquidity window" and were out of a 3G fund.

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

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

Berkshire and Buffett are not defendants. Buffett told CNBC on Monday that the market responded "probably quite rightly" to Kraft Heinz's news.

Shareholder bills are common after unexpected bad news has damaged the company's share price. They are often combined in a single lawsuit near where the company is based.

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

(Reporting by Melissa Fares, Trevor Hunnicutt and Jonathan Stamp in New York, editing Marguerita Choy)

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