Wed Jan 20, 2010 9:57am EST
CNBC VIDEO: Becky Quick One-On-One with Warren Buffett -21/01/10
* Says Kraft buy of Cadbury is “a bad deal”
* Says feels “poorer” after Kraft deals
* Says Kraft CEO has done a good job on operations
* Indicates he will not sell Kraft stake
* Kraft shares down 2.2 pct (Adds more Buffett comments, byline)
By Brad Dorfman
CHICAGO, Jan 20 (Reuters) – Warren Buffett said Kraft Foods Inc’s (KFT.N) proposed $19.6 billion acquisition of Cadbury Plc (CBRY.L) is a “bad deal” and questioned how Chief Executive Irene Rosenfeld chose to pay for it.
While Buffett indicated he would not sell his stake in Kraft, shares of the company fell more than 2 percent as the U.S. food group came under pressure from its largest shareholder.
“Irene has done a good job in operations. I like Irene. I mean, I find her — she’s been straightforward with me, we just disagree,” Buffett told cable business channel CNBC on Wednesday.
“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,” he said.
Buffett’s Berkshire Hathaway (BRKa.N) holds a 9.4 percent stake in Kraft, the world’s second-largest food group.
On Tuesday, Kraft sealed a deal with Cadbury’s board to buy the British chocolatier for cash and stock after a four-month long hostile takeover battle. [ID:nL9294700]
The final deal included more cash and less new kraft shares than Kraft had previously offered. It changed the deal to offer fewer shares after Berkshire said it would vote against an initial plan to issue up to 370 million shares.
Ironically, in lowering the number of shares issued, Kraft no longer needs its shareholders to approve the deal.
“If I had a chance to vote on this, I’d vote no,” Buffett said. “I think Kraft is still undervalued. I just don’t think it is as undervalued as it was three weeks ago.”
Buffett also questioned Kraft selling its fast-growing pizza business to Nestle SA (NESN.VX) in a move that raised cash for the Cadbury deal.
“I feel poorer,” Buffett said of the deals.
Kraft shares fell 2.2 percent to $28.75 after Buffett’s comments.
A Kraft spokeswoman defended the Cadbury deal in response to Buffett’s remarks.
“We respect his opinion,” spokeswoman Perry Yeatman said. “He’s one of our largest investors. We think this is a good deal for us. It transforms our portfolio for better long-term growth.” (Reporting by Brad Dorfman, editing by Michele Gershberg, Gerald E. McCormick, Dave Zimmerman)
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