Buffett attacks Kraft's £11.9bn tilt at Cadbury
Thursday 21 January 2010
Kraft's largest shareholder, Warren Buffett, condemned the company's proposed £11.9bn takeover of Cadbury as a "bad deal" yesterday, saying he felt "poor" as a result.
The billionaire investor, whose Berkshire Hathaway group holds 9.4 per cent of Kraft, said: "If I had a chance to vote on this, I'd vote no." He has consistently been critical throughout Kraft's courting of Cadbury.
Speaking a day after the takeover was announced, Mr Buffett said: "I've got a lot of doubts about the deal." He added: "They are using their own stock that their own directors say is significantly undervalued." Yet, he ruled out selling his stake, saying the move would be "too expensive" with the shares so undervalued. A spokesman for Kraft said: "We respect Buffett's opinion, but we think this is a good deal for us."
In the early hours of Monday, Cadbury's management finally dropped its opposition and backed Kraft's improved cash and paper offer – which, including a 10p special dividend, was last night worth 840p a share. Kraft upped the cash component of the offer and reduced the amount of new shares it would have to issue to under 20 per cent of the group's market capitalisation. This avoids Kraft having to take the offer to its shareholders for approval, much to Mr Buffett's displeasure.
Mr Buffett once again criticised the company's sale of its North American pizza business for $3.7bn to Nestle this month to help finance the Cadbury offer.
Yet Kraft took heart from Mr Buffett's backing of its chairman and chief executive Irene Rosenfeld. He said "she has done a good job", adding there was nothing more than a "difference of opinion" over the deal. "We just disagree," he said. "She thinks this is a good deal, I think it's a bad deal. I think she's a perfectly decent person, she could be a trustee under my will, I just don't want her making this particular deal."
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