The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Jennifer Saba

NEW YORK, Sept 2 (Reuters Breakingviews) - Kraft Heinz KHC.O is remaking the sausage and it’s as unpleasant to see as ever. Chief Executive Carlos Abrams-Rivera unveiled plans to split Oscar Mayer hot dogs and other North American groceries from its worldwide “taste elevation” condiments including ketchup in a tax-free spinoff. Despite producing a wide variety of brands, the endless cycle of wheeling and dealing seems to come in only one yucky flavor.

The $33 billion company is undoing a messy mega-merger cooked up a decade ago by 3G Capital and Warren Buffett. Since Kraft and Heinz combined in 2015, its stock price has plummeted 70%. The billionaire investor’s Berkshire Hathaway BRKa.N last month wrote down the value of its investment a second time while the buyout shop offloaded the last of its stake a few years ago.

There was plenty of hype initially. Kraft and Heinz promised to squeeze out some $1.5 billion of annual cost savings from being bigger. And yet on Tuesday, Abrams-Rivera touted the benefits of splitting the company to reduce operational complexity and allocate capital more shrewdly. Even better, pulling the two food-makers apart apparently will only lead to $300 million of dis-synergies.

The latest financial engineering seems implausibly optimistic, even though the company looks different than it did a decade ago and it’s not being cleaved into the same two pieces that were originally slapped together. Kraft Heinz, for example, spent notably less on sales, general and administrative expenses as a proportion of revenue last year, at 14%, than rivals Kellanova K.N and McCormick MKC.N, according to Visible Alpha. It probably will take far more investment from both newly independent businesses to make up lost ground.

A tortuous corporate history also provides good reasons to be skeptical about the split’s ability to create lasting value. Kraft was part of a wild M&A strategy at tobacconist Philip Morris PM.N before it was offloaded two decades later. It then bought British confectioner Cadbury, only to split up in a deal that formed Mondelez International MDLZ.O.

Kraft Heinz shares tumbled another 7% after the latest breakup news hit. It implies significant doubts that the zippier half, with nearly $4 billion of EBITDA last year, will grow enough independently or fetch a multiple nearer 14 times, approaching spice-maker McCormick. In that scenario, the “taste elevation” enterprise alone would be worth $56 billion, or about the same as the whole company today. Just as when the companies first combined, they seem to be spreading it on thick.

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CONTEXT NEWS

Kraft Heinz said on September 2 that it had approved a plan to separate into two independently traded companies through a tax-free spinoff that will split shelf-stable products including ketchup from Oscar Mayer, Kraft Singles and Lunchables.

Chief Executive Carlos Abrams-Rivera will become CEO of the North American Grocery company, which generated about $10.4 billion of net sales and $2.3 billion of adjusted EBITDA in 2024. The board is seeking a potential leader for the so-called Global Taste Elevation business, with 2024 net sales of $15.4 billion and adjusted EBITDA of $4 billion.

The company anticipates up to $300 million of dis-synergies from the spinoff.

Centerview Partners is advising Kraft Heinz.

(Editing by Jeffrey Goldfarb; Production by Pranav Kiran)

((For previous columns by the author, Reuters customers can click on SABA/jennifer.saba@thomsonreuters.com))