By ILAN BRAT
JANUARY 20, 2010, 5:39 P.M. ET
CNBC VIDEO: Becky Quick One-On-One with Warren Buffett -21/01/10
Warren Buffett, whose Berkshire Hathaway Inc. is Kraft Foods Inc.’s biggest shareholder, on Wednesday said the maker of Oreo cookies paid too much to clinch a deal for Cadbury PLC.
Mr. Buffett, on the CNBC cable channel, expressed confidence in Kraft Chief Executive Irene Rosenfeld but said, “I’ve got a lot of doubts about the deal….If I had a chance to vote on this, I’d vote no.”
Mr. Buffett’s comments came a day after Cadbury’s board recommended that the British candy maker’s shareholders sell the company to Kraft Foods after it increased the value of its original offer to $19.1 billion, or about 850 pence a share, from about 745 pence. About 60% of the offer is cash, the rest in Kraft stock.
“We respect Buffett’s opinion,” a spokesman for Kraft said in a statement. “We think this is a good deal for us. It transforms our portfolio for better long term growth.”
Kraft faced a Tuesday deadline to raise its offer for Cadbury. Hershey Co. had been planning to top Kraft’s original offer, and the Pennsylvania chocolate maker’s board last week authorized a bid of as much as 825 pence, with 40% in cash, according to several people familiar with the matter.
In the first days of January, Kraft said it would sell its fast-growing pizza business to Nestlé SA for about $3.7 billion and use some of the proceeds for a sweetened bid.
Mr. Buffettsaid Kraft sold the business at too low a price and also said that while Kraft shares are undervalued, they aren’t as valuable without the pizza business.
He indicated that he believes Kraft executives became too wrapped up in winning Cadbury to carefully consider the prices at which they would be buying Cadbury and selling the pizza business.
“There’s a deal momentum that gets created in any transaction,” he said. Kraft executives “want the deal. If you really want the deal, you’ll have all the people who work for you telling you, ‘Do it.’ “
When asked whether he plans to sell his nearly 10% stake in Kraft, Mr. Buffett paused a moment, then said, “That gets expensive.” He added: “If I don’t like what’s going on in government, it doesn’t mean I have to leave the country.”
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