Kraft Heinz Shares Slump After Buffett Admits "We Overpaid"

In what was undoubtedly a highlight of Warren Buffett's wide-ranging interview Monday morning interview with CNBC - something that has become an annual tradition following the release of Buffett's investor letter - the legendary investor admitted to Squawk Box host Becky Quick that Berkshire Hathaway overpaid during the merger that created Kraft Heinz.

"I was wrong in a couple of ways about Kraft Heinz," Buffett said. "We overpaid for Kraft."

Unsurprisingly given recent events, Kraft-Heinz has dominated the conversation surrounding Buffett's annual letter due to the revelation, included in the company's Q4 earnings report released just days prior to the letter, that Kraft had taken a $15 billion goodwill writedown on its trademark Kraft and Oscar-Meyer brands (and other assets) - a writedown that contributed to a massive Q4 loss for Berkshire.

In the spirit of CNBC's unspoken deference to Wall Street titans (unless that titan's name is Jeffrey Gundlach), the conversation largely avoided talk of the SEC accounting probe into Kraft-Heinz (but asking hard-hitting questions isn't exactly a core competency for CNBC).

In the face of a torrent of criticism emanating from the financial press about Kraft Heinz's failure to adapt to changing consumer tastes, though he admitted that he was "wrong in a couple ways about Kraft" (the company, he said, would likely continue to struggle with the loss of bargaining power given the growing influence of retailer brands like Costco's Kirkland), Buffett still defended its overall business model, and kept mum about the prospects for a merger.

"It's still a wonderful business in that it uses about $7 billion of tangible assets and earns $6 billion pretax on that," Buffett said. "But we, and certain predecessors, we paid $100 billion in tangible assets. So for us, it has to earn $107 billion, not just the $7 billion that the business employs."

Despite these kind words, Kraft-Heinz shares slumped on the comments, even though Buffett said Berkshire would probably hold on to its stake because - if for no other reason - it would be simply too difficult to sell.

Shares dropped back below $40 in the pre-market.


Watch a clip from the interview below:

Warren Buffett: Berkshire Hathaway 'overpaid' for Kraft from CNBC.