DealZone

Is Buffett being Krafty?

January 5, 2010

Warren Buffett may have thrown a monkey wrench into Kraft’s bid for Cadbury — not with his ‘no’ vote on Kraft’s plan to issue 370 million shares to help buy the British chocolate company, but with his scathing comments on Kraft’s board for a deal he has long regarded with skepticism. Buffett previously said Kraft’s stock was an “expensive currency” for funding the deal, a position he repeated on Tuesday.

Kraft’s proposed share issue would give it a “blank check,” allowing it to change its offer for Cadbury, Buffett’s insurance and investment company Berkshire Hathaway said in a statement. “And we worry very much that, indeed, there will be an additional change from the revision announced this morning.”

The statement came hard on the heels of a slight sweetening by Kraft of its $16.4 billion offer for Cadbury. The overall figure is the same, but the cash portion is a bit bigger. Perhaps more telling, it also followed a statement from Nestle shooting down speculation that the world’s biggest food group had any interest in getting involved in the Cadbury deal.

With Cadbury’s hopes for a new bidder now effectively dashed, and Kraft having tweaked its offer, any defections from the Kraft side will further crimp expectations that the bid might be raised again. Isn’t this precisely the message Kraft wants Cadbury to get?

While we’re on the subject of Kraftiness, we note the sale of Kraft’s frozen pizza business for $3.7 billion to Nestle — which is mean to help fund the increased cash portion of the Kraft bid — could well have helped Nestle decide to steer investors away from thinking it would challenge Kraft’s Cadbury bid.

Comments
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Cadbury is being stupid. Its stock goes to 690p (where it traded before KFT came along) if KFT walks and KFT knows this. It doesn’t need to bid against itself. Read a wild story about a young worker Wall Street at http://storyburn.com

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