Jan 20, 2010
Buffett: I Would Have Voted Against Kraft-Cadbury Deal
I’ll add the video when it comes up:
Warren Buffett tells CNBC in a live interview on Squawk Box this morning that he has “a lot of doubts” about Kraft’s planned purchase of Cadbury and that he “feels poor” in the wake of the deal.
The deal does not need to be approved by shareholders, but “If I had a chance to vote on this, I’d vote no.”
…Despite his criticism, Buffett rejected Joe Kernen’s suggestion that he show his displeasure by selling Berkshire’s stake of over 9 percent in Kraft. That, he says, would be too expensive because Kraft’s stock is still “undervalued” but not as undervalued as it was three weeks ago.
Buffett also strongly criticized Kraft’s recent sale of a pizza business to Nestle at a price he believes was too low.
But he says Kraft CEO Irene Rosenfeld is a “good operator” and a “good person.” He has “cordial relations” with her despite their “difference of opinion.”
Warren Buffett: I Would Have Voted Against Kraft-Cadbury Deal (CNBC)
Buffett’s displeasure for the Kraft (NYSE:KFT) is not new, weeks ago Buffett lamented Rosenfeld’s wasteful plan to issue stock for the deal. Now, with the cash portion of the bid raised, the deal is less dilutive but still too rich for Buffett. Remember that he thought the deal was fairly valued when Rosenfeld made Kraft’s initial offer. Finally, it looks as if Buffett thought that the decision to sell Kraft’s pizza business was a poor one, going for below average multiples (9X) just to generate cash for raising the company’s bid.
On the other hand, Bill Ackman of Pershing Square seems very positive about the deal. He feels that the margins and the international market access that Kraft will gain from the deal will add tremendous value. It’s always interesting to see great investors disagree and it shows you that investing is often more art than science.
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