Author: Darren Rickard

By MICHAEL CAROLAN

LONDON — Cadbury PLC shares slipped to within pennies of Kraft Foods Inc.’s offer price Wednesday as hopes of a vastly improved offer from the U.S. food giant receded.

Cadbury shares had slipped a further seven pence, or 0.8%, by 1400 GMT Wednesday to 772 pence, following a 3.2% fall Tuesday. The drop followed a double blow for Cadbury’s investors Tuesday.

First, Nestlé SA ruled itself out of the running for Cadbury, damping hopes of a competitive auction. Then, later in the day, Kraft’s largest shareholder, Warren Buffett, fired a shot across Kraft’s management’s bow, warning them against overpaying for the U.K. confectioner.

Mr. Buffett’s warning — and his pledge to vote against a Kraft proposal to issue 370 million shares to fund the deal — may have put a cap on the amount Kraft can pay for the deal.

In an unusual move, Warren Buffett issues a public warning to Kraft, which is trying to take over Cadbury. The News Hub analyzes why Mr. Buffett acted.

Analysts and investors had been hoping for a higher offer from Kraft of up to 900 pence a share. Any revised offer is now thought unlikely to go far above 800 pence.

“Cadbury’s management may have increased the probability of remaining independent but the potential for a major advance on Kraft’s original offer may also be losing momentum,” said Clive Black of Shore Capital.

Kraft’s original cash-and-share offer — comprising 300 pence in cash and 0.2589 new Kraft shares for each Cadbury share — valued the Dairy Milk maker at £10.2 billion, or 745 pence a share.

Fluctuations in exchange rates and Kraft’s own share price has seen the value of the offer dip as low as 712 pence in recent weeks. Mr. Buffett’s intervention Tuesday–through his Berkshire Hathaway Inc. investment company — sent Kraft shares almost 5% higher as concerns the company would overpay abated.

Paradoxically, this raised the effective value of the bid to 765 pence at Tuesday’s close, just seven pence short of Cadbury’s share price. The spread between the share price and the offer price is now narrower than it has been since Kraft first approached Cadbury on Sept. 7.

“The value of Kraft’s acquisition currency has therefore risen, giving succor to the conspiracy theorists who have speculated overnight that this was Berkshire’s ultimate objective,” said Martin Deboo of Investec Secutities.

Mr. Deboo still sees a bid of 820 pence as possible, providing Kraft comes up with more cash for the deal rather than more equity. “Kraft could increase the cash element of its offer from 300 pence to 450 pence and stay on the right side of an investment grade rating,” he said in a note.

A higher offer looks essential, however. As of Tuesday, Kraft had received acceptances for its offer from Cadbury’s shareholders representing just 1.52% of the U.K. confectioner’s shares, as the vast majority of Cadbury’s shareholders appeared happy to wait for a higher bid.

In a separate development, the U.K.’s business minister Peter Mandelson again waded into the takeover saga Wednesday with a veiled threat to Kraft.

“Companies making acquisitions should set out transparently and publicly their long-term plans for the assets they propose to acquire, including company headquarters, R&D sites and main plants,” said Lord Mandelson in a speech.

In recent weeks Lord Mandelson has warned Kraft against trying to make a “quick buck” on Cadbury and said that any buyout would have to respect the company’s “work force and the heritage and quality.”

He has also conceded however that he has “no statutory power to intervene in this case.”

Share Investor Links

Share Investor Blog – Stockmarket & Business commentary
Share Investor New Zealand Business News– Get more business news
Discuss this topic @ Share Investor Forum – Register free
Share Investor’s Daily Forex Updates

Recommended Amazon Reading

	Security Analysis: Sixth Edition, Foreword by Warren Buffett (Security Analysis Prior Editions) by Benjamin Graham Buy new: $47.25 / Used from: $46.96 Usually ships in 9 to 11 days
	The Four Filters Invention of Warren Buffett and Charlie Munger by Bud Labitan Buy new: $33.25 / Used from: $43.89 Usually ships in 24 hours

From Amazon – Apple iPod touch 32 GB (3rd Generation) NEWEST MODEL

OMAHA, Neb. January 6, 2010 (AP)

Billionaire Warren Buffett’s Berkshire Hathaway Inc. on Wednesday filed documents for a $1 billion debt offering with proceeds to retire existing debt due this year.

The company, in a regulatory filing, said it plans to offer $750 million in senior notes due 2040 and $250 million in floating rate senior notes due 2010.

The notes will be senior unsecured indebtedness of Berkshire Hathaway Finance Corp. and will rank equally with all its other existing and future senior unsecured indebtedness, the filing said.

The company said as of Sept. 30, Berkshire Hathaway Finance Corp. had no secured indebtedness and $12.1 billion of debt.

Berkshire Hathaway Inc. had $169 million of debt and its subsidiaries had $37.8 billion of debt.

Shares rose $6 to $99,716 per share.

Share Investor Links

Share Investor Blog – Stockmarket & Business commentary
Share Investor New Zealand Business News– Get more business news
Discuss this topic @ Share Investor Forum – Register free
Share Investor’s Daily Forex Updates

Recommended Amazon Reading

	How to Think Like Benjamin Graham and Invest Like Warren Buffett by Lawrence Cunningham Buy new: $14.93 / Used from: $7.84 Usually ships in 24 hours
	What I Learned Before I Sold to Warren Buffett: An Entrepreneur’s Guide to Developing a Highly Successful Company by Barnett C. Helzberg Jr. Buy new: $23.36 / Used from: $0.75 Usually ships in 24 hours

From Amazon – Apple iPod touch 32 GB (3rd Generation) NEWEST MODEL

CHICAGO (Reuters) – Warren Buffett’s Berkshire Hathaway Inc issued a stern warning to Kraft Foods Chief Executive Irene Rosenfeld, saying it opposed the food maker’s plan to float new shares in pursuit of Cadbury Plc.

It was the strongest statement yet by Berkshire questioning Kraft’s hostile 10 billion pound cash and stock offer for the UK confectioner. Berkshire is Kraft’s single largest shareholder, with a 9.4 percent stake in its own holdings and its pension funds.

Kraft shares rose 3.5 percent after the Berkshire statement, while Cadbury fell 3.3 percent on concerns opposition by Buffett would severely constrain a deal.

Berkshire said it voted against Kraft’s proposal to issue up to 370 million shares to help the food maker buy Cadbury, but could reverse to a “yes” vote, depending on the final offer’s details. Berkshire declined to elaborate further about the statement.

It said the proposal, if carried out, would give Kraft a “blank check” allowing it to change its offer for Cadbury.

Earlier on Tuesday, Kraft raised the cash portion of its offer to Cadbury shareholders, helped by a $3.7 billion deal to sell its North American frozen pizza business to Nestle. Kraft cited in part concern by its own investors over using undervalued company shares as currency.

“We worry very much that, indeed, there will be an additional change from the revision announced this morning,” Berkshire said in its statement.

Buffett had already warned Kraft against paying too much for Cadbury, and investors said the new statement was a clear signal to Rosenfeld to tread carefully.

“If Buffett votes against something — that carries a great deal of weight with other shareholders,” said Jerry Bruni, CEO and portfolio manager of J.V. Bruni and Co, which holds Berkshire shares. “When he says no, no is what he says and means.”

KRAFT’S ROOM TO MANEUVER

But some shareholders said the statement leaves Rosenfeld with room to maneuver.

“I don’t think he’s throwing a monkey wrench in the deal. This is Warren Buffett 101,” said Frank Betz, a principal at Carret Zane Capital Management LLP and an owner of Berkshire shares who has played bridge with Buffett.

“He’s often used the representation that one certainty is that people are going to continue to want to eat Dilly Bars,” Betz said, referring to Dairy Queen ice cream bars. “By golly, if they are going to want to be eating dilly bars far into the future they are sure going to want to be eating Cadbury milk chocolate.”

A Kraft spokeswoman said the company agrees its shares are “deeply undervalued,” would remain disciplined and would not do anything that hurts shareholder value.

“He is our largest investor and one of the most respected investors in the world so of course we take his opinion seriously,” she said of Buffett.

Berkshire said it does not believe any Kraft shareholder should vote “yes” to the proposal without knowing what they are voting for. However, it said that it would change its own vote from “no” to “yes” if, after seeing the final offer Kraft is expected to present later this month, it concludes that the offer does not destroy value for Kraft shareholders.

Back in September, Buffett warned Kraft not to overpay for Cadbury, saying: “Any time you’re in a takeover, animal spirits run high and all of that. But Kraft has the disadvantage of using an undervalued stock.”

“Using undervalued shares does make the deal more expensive,” said Morningstar analyst Erin Swanson. “So while we agree with that, Berkshire’s vote may not be enough to block a deal for Cadbury. It is definitely a pointed message about the unfavorable position that Berkshire holds regarding Kraft’s pursuit of the confectionary firm.”

(Additional reporting by Michael Erman and Lilla Zuill in New York, Jessica Hall in Philadelphia and Aaron Pressman in Boston; Editing by Michele Gershberg and Tim Dobbyn)

Share Investor Links

Share Investor Blog – Stockmarket & Business commentary
Share Investor New Zealand Business News– Get more business news
Discuss this topic @ Share Investor Forum – Register free
Share Investor’s Daily Forex Updates

Recommended Amazon Reading

	How to Think Like Benjamin Graham and Invest Like Warren Buffett by Lawrence Cunningham Buy new: $14.93 / Used from: $7.84 Usually ships in 24 hours
	What I Learned Before I Sold to Warren Buffett: An Entrepreneur’s Guide to Developing a Highly Successful Company by Barnett C. Helzberg Jr. Buy new: $23.36 / Used from: $0.75 Usually ships in 24 hours

From Amazon – Apple iPod touch 32 GB (3rd Generation) NEWEST MODEL

January 05, 2010, 08:09 PM EST

By Andrew Frye

Jan. 6 (Bloomberg) — Warren Buffett, the billionaire investor who helped scuttle Coca-Cola Co.’s bid for Quaker Oats 10 years ago, is restraining Kraft Foods Inc. in its quest to acquire Cadbury Plc.

Buffett’s Berkshire Hathaway Inc., Kraft’s biggest shareholder, urged fellow investors to oppose a plan to issue as many as 370 million shares to help buy the U.K.-based candy maker. Kraft Chief Executive Officer Irene Rosenfeld is seeking a “blank check” for the deal, Berkshire said yesterday.

“I think Buffett’s got it nailed,” said Donald Yacktman, founder of Yacktman Asset Management Co., which holds Kraft shares. “Kraft is hemmed in — there’s only so much they’re going to be able to do to make this acquisition.”

Buffett, who has said shareholders must act like owners, urged caution in negotiations after Cadbury rejected Kraft’s bid of 10.6 billion pounds ($17 billion). In publicly asking others to join him, the 79-year-old Berkshire chairman is drawing on his power as a 9.4 percent owner of Kraft and his standing in financial markets as the world’s preeminent investor.

Berkshire said it may support a Cadbury takeover if it concludes this month that the final offer “does not destroy value for Kraft shareholders.” Buffett’s assistant, Carrie Kizer, said the company had no comment.

“If he says no, everybody else is going to pile on and say no too,” said Justin Fuller, a partner at Midway Capital Research & Management who runs the buffettologist.com Web site.

Disagreed With Coke

Buffett was the most vocal dissenter on Coca-Cola’s board when directors met in 2000 to discuss a $15.3 billion bid for Quaker Oats, the maker of Gatorade, Cap’n Crunch cereal and Rice-A-Roni. Buffett argued the price was too high because a stock swap proposed as part of the deal would give up more than 10 percent of Atlanta-based Coca-Cola, board member James Williams said in an interview about three years later.

The board voted against the acquisition, and PepsiCo Inc. bought Quaker Oats in August 2001 for $14 billion. Berkshire remains the largest shareholder in Coca-Cola. Buffett’s company also holds the biggest stakes in American Express Co. and Wells Fargo & Co.

“It’s unusual for Berkshire to put out any sort of comment like this publicly,” said Glenn Tongue, a partner at T2 Partners LLC, which holds investments in Omaha, Nebraska-based Berkshire and Kraft. Buffett’s opposition to a stock sale may prevent Kraft from overbidding, he said. “As a shareholder, I love seeing this,” he said.

Buffett’s Record

Buffett won a global following as the “Oracle of Omaha” by profiting from investments in out-of-favor companies and firms he believes have unassailable advantages, including See’s Candies and ice-cream maker Dairy Queen. He agreed to buy $6.5 billion in debt and preferred shares in Wm. Wrigley Jr. Co. to help Mars Inc. acquire the chewing-gum maker in 2008. Last year, Berkshire bought stock in Kraft rival Nestle SA.

“I’m not surprised that Berkshire would resist issuing shares,” said Tom Russo, partner at Gardner Russo & Gardner, which holds Berkshire, Cadbury and Vevey, Switzerland-based Nestle. Buffett “has had the longstanding belief that equity capital is very scarce.”

Rosenfeld, CEO at Northfield, Illinois-based Kraft since 2006, is seeking to buy Cadbury, the maker of Creme Eggs and Trident gum, to expand outside the U.S. Kraft raised the cash portion of its bid yesterday after agreeing to sell pizza brands including DiGiorno and Tombstone to Nestle, the world’s largest food company.

‘Expensive’ Shares

Cadbury fell 3.2 percent to 779 pence yesterday in London, the biggest drop in eight months. Kraft added $1.34, or 4.9 percent, to $28.77 in New York trading. That values Berkshire’s stake at more than $3.9 billion.

Buffett said in the statement that Kraft shares were “very expensive ‘currency’” after falling about 17 percent in the two years ended last week, and he criticized management for seeking to issue stock at current prices after repurchasing shares at $33 in 2007. Kraft executives “have to do a lot of things right to justify this price,” Buffett said in September on CNBC.

“We agree that Kraft Foods shares are deeply undervalued,” the foodmaker said in a statement. “We intend to remain disciplined in this process.”

–With assistance from Duane Stanford in Atlanta. Editors: Dan Kraut, Dan Reichl

Share Investor Links

Share Investor Blog – Stockmarket & Business commentary
Share Investor New Zealand Business News– Get more business news
Discuss this topic @ Share Investor Forum – Register free
Share Investor’s Daily Forex Updates

Recommended Amazon Reading

	How to Think Like Benjamin Graham and Invest Like Warren Buffett by Lawrence Cunningham Buy new: $14.93 / Used from: $7.84 Usually ships in 24 hours
	What I Learned Before I Sold to Warren Buffett: An Entrepreneur’s Guide to Developing a Highly Successful Company by Barnett C. Helzberg Jr. Buy new: $23.36 / Used from: $0.75 Usually ships in 24 hours

From Amazon – Apple iPod touch 32 GB (3rd Generation) NEWEST MODEL

Download the Prospectus for Shareholders in Burlington Northern Santa Fe deal with Berkshire Hathaway.

It is in PDF format.

Share Investor Links

Share Investor Blog – Stockmarket & Business commentary
Share Investor New Zealand Business News– Get more business news
Discuss this topic @ Share Investor Forum – Register free
Share Investor’s Daily Forex Updates

Recommended Amazon Reading

	How to Build a Business Warren Buffett Would Buy: The R. C. Willey Story by Jeff Benedict Buy new: $13.57 / Used from: $9.24 Usually ships in 24 hours
	The Winning Investment Habits of Warren Buffett & George Soros by Mark Tier Buy new: $10.85 / Used from: $5.95 Usually ships in 24 hours

From Amazon – Apple iPod touch 32 GB (3rd Generation) NEWEST MODEL

In an unprecendented move, Berkshire Hathaway is publicly, and strongly, criticizing Kraft Foods for its continuing efforts to acquire Cadbury [CBY 49.73 -1.92 (-3.72%) ].

Berkshire says in a news release this morning that it has voted against Kraft’s proposal to authorize the issuance of up to 370 million shares to facilitate a deal, and urges other shareholders to follow its lead.

As the release pointedly notes in its first paragraph, Berkshire and its pension funds control a stake of over 9.4 percent in Kraft. Berkshire is Kraft’s biggest shareholder, with over 138 million shares.

Kraft shares are rallying over 3 percent this morning to $28.44, apparently on the belief that Buffett’s opposition will keep Kraft from raising its bid yet again.

Current price: [KFT 28.77 1.34 (+4.89%) ]

While Buffett’s name is never mentioned in the news release, it clearly reflects his views, and he’s not happy.

It is extremely unusual for Buffett to be so publicly critical of a company in which Berkshire has a stake. One long-time investor tells us that “NEVER in my recollection has Berkshire ever voted against management .. This is very significant.”

Buffett did signal back in September that he opposed an increase in Kraft’s bid at the time, calling the offer “pretty full.” At that time, however, he told us he wasn’t opposed to the existing bid and had confidence in Kraft’s management.

Things have apparently changed.

Today’s release says Kraft’s share-issuance proposal would “give Kraft a blank check” to change its offer for Cadbury “in any way it wishes” .. and “we worry very much that, indeed, there will be an additional change” from the sweetened bid (more cash, less stock) announced by Kraft today.

“To state the matter simply, a shareholder voting ‘yes’ today is authorizing a huge transaction without knowing its cost or the means of payment.

What we know with certainty, however, is that Kraft stock, at its current price of $27, is a very expensive ‘currency’ to be used in an acquisition.”

Berkshire recalls that in 2007 Kraft spent $3.6 billion for a stock buyback at about $33 per share. “Does the board now believe those purchases were a mistake and that Kraft’s true value is onlt the current price of $27 per share — and that it is therefore fine to structure a major acquisition based upon that price?”

The release leaves open the possibility that it could change its vote to “yes” if Kraft’s final offer, to be announced by January 19, “does not destroy value for Kraft shareholders.”

But for now, Berkshire concludes, “We believe no shareholder should vote ‘yes’ when he can’t possibly know what he is voting for.”

Kraft responds that it takes Buffett’s opinion seriously, agrees that its shares are deeply undervalued. But, it promises to remain disciplined and “would certainly not do anything that hurts shareholder value.”

The company says holders will be able to make a fully informed decision by January 19, well ahead of a February 1 shareholders meeting. It’s confident shareholders will authorize the issuance of shares.

Current Berkshire stock prices:

Class A: [BRK.A 99710.00 110.00 (+0.11%) ]

Class B: [BRK.B 3327.00 16.00 (+0.48%) ]

Topics:Mergers & Acquisitions | Warren Buffett

Companies:Cadbury plc | Kraft Foods Inc. | Berkshire Hathaway Inc.

Share Investor Links

Share Investor Blog – Stockmarket & Business commentary
Share Investor New Zealand Business News– Get more business news
Discuss this topic @ Share Investor Forum – Register free
Share Investor’s Daily Forex Updates

Recommended Amazon Reading

	How to Build a Business Warren Buffett Would Buy: The R. C. Willey Story by Jeff Benedict Buy new: $13.57 / Used from: $9.24 Usually ships in 24 hours
	The Winning Investment Habits of Warren Buffett & George Soros by Mark Tier Buy new: $10.85 / Used from: $5.95 Usually ships in 24 hours

From Amazon – Apple iPod touch 32 GB (3rd Generation) NEWEST MODEL

By Justin Baer in New York

Published: January 6 2010 02:00 | Last updated: January 6 2010 02:00

Warren Buffett yesterday said he would oppose Kraft’s plan to issue as many as 370m shares to fund its hostile takeover of Cadbury, a stern message from the US food company’s largest investor just as it readies its final assault on the UK chocolatier.

Berkshire Hathaway, the holding company that controls Mr Buffett’s investments, owns about 9.4 per cent of Kraft. Mr Buffett declined to comment.

Alice Schroeder, a former stock analyst and author of The Snowball: Warren Buffett and the Business of Life , said the billionaire investor’s statement may have been an effort to remind Kraft to take a disciplined approach to its final bid before the transaction’s costs overrun its benefits.

“He’s using his position here to send a message to everyone,” Ms Schroeder said. “He’s obviously frustrated that Kraft hasn’t listened to his private suggestions. And it’s a message partly to Cadbury. For them to call Kraft’s bid derisory, when there are no other offers, is incredible.”

In a statement, Berkshire said it voted against the share proposal, calling the plan a “blank cheque” that gives Kraft the right to revise the terms of its bid again before the final offer is due on January 19.

“We worry very much that … there will be an additional change from the revision announced this morning,” Berkshire said.

“To state the matter simply, a shareholder voting ‘yes’ today is authorising a huge transaction without knowing its cost or the means of payment.”

Two other rivals, Hershey and Italy’s Ferrero, have said they are weighing making a bid for Cadbury.

Berkshire said it would consider changing its vote to “yes” once Kraft announces the terms of its final offer.

But the investment company noted that Kraft spent $3.6bn in 2007 to buy back stock at $33 each, “presumably because the directors and management thought the shares would be worth more. Does the board now believe those purchases were a mistake and that Kraft’s true value is only the current price of $27?” Berkshire said.

Kraft shares rose about 3.1 per cent to $28.29 in late morning trading in New York. Cadbury’s American depositary receipts slumped 3.5 per cent to $49.86.

“We agree that Kraft Foods shares are deeply undervalued and we would certainly not do anything that hurts shareholder value,” Kraft said. “As we have stated before, we intend to remain disciplined in this process.”

Share Investor Links

Share Investor Blog – Stockmarket & Business commentary
Share Investor New Zealand Business News– Get more business news
Discuss this topic @ Share Investor Forum – Register free
Share Investor’s Daily Forex Updates

Recommended Amazon Reading

	Warren Buffett on Business: Principles from the Sage of Omaha by Richard J. Connors Buy new: $16.47 / Used from: $11.25 Usually ships in 24 hours
	Warren Buffett Speaks: Wit and Wisdom from the World’s Greatest Investor by Janet Lowe Buy new: $13.57 / Used from: $4.49 Usually ships in 24 hours

From Amazon – Apple iPod touch 32 GB (3rd Generation) NEWEST MODEL

Kraft Foods took a big step on Tuesday to shore up its $16 billion hostile bid for Cadbury, the British confectioner, by selling one of its most profitable units to Nestlé.

But Kraft’s largest shareholder, Berkshire Hathaway, urged the company to be cautious.

By selling its North American pizza unit to Nestlé for $3.7 billion in cash, Kraft raised money to increase the cash portion of its Cadbury offer, though it did not raise its overall price. Kraft also took out a potential rival in Nestlé, which said it had no plans to pursue an offer.

Analysts and investors have wondered for weeks whether Nestlé was preparing to make a bid, speculation that grew on Monday after Nestlé, based in Switzerland, said it would sell its remaining stake in the eye care company Alcon for $28.1 billion. Instead, it chose to bolster its presence in the North American frozen-pizza business, acquiring brands like DiGiorno and Tombstone in the United States, Delissio in Canada and the California Pizza Kitchen trademark.

Yet an unexpected wrinkle also arose when Berkshire, the conglomerate controlled by Warren E. Buffett, said in a statement that it opposed Kraft’s plan to issue up to 370 million new shares to support its Cadbury offer. Berkshire, which holds a 9.4 percent stake in Kraft, said it was worried that the company might spend too much and dilute its shareholders. It pointed to Kraft’s $3.6 billion stock buyback — at $33 a share — as proof that issuing too much new stock at today’s prices would be wasteful.

“The share-issuance proposal, if enacted, will give Kraft a blank check allowing it to change its offer to Cadbury — in any way it wishes — from the transaction presented to shareholders in the proxy statement,” Berkshire said. The company added that it would change its mind if Kraft’s final bid, due Jan. 19, did not harm its investors. Kraft shareholders will vote on the new shares proposal on Feb. 1.

While Cadbury has said that it would prefer independence than absorption into a low-growth food conglomerate, the company has also said that it would consider bids that were high enough. Analysts estimated £8, or $12.80, a share as a starting point.

Cadbury’s chairman, Roger Carr, derided Kraft’s offer, saying its talk of discipline was “simply a smokescreen to justify an attempt to steal from the Cadbury shareholders.”

But Kraft is under pressure from investors not to dilute their holdings too greatly, limiting the amount of stock it can issue. Mr. Buffett said last year that he believed Kraft’s original offer was a “pretty full” price. At the same time, Kraft has vowed to maintain an investment-grade rating.

By selling its North American pizza business, Kraft plans to offer an additional 60 pence a share in cash to Cadbury shareholders. Kraft had begun talks with Nestlé over the pizza business before it bid for Cadbury, according to a person briefed on the matter.

Jon Cox, a food and beverage analyst at Kepler Capital Markets based in Zurich, said he did not believe Berkshire’s opposition would sink the deal.

“It has a negative impact, but I still think the shareholders will approve the deal,” he said, adding that Kraft would be buying Cadbury relatively cheaply, compared with similar recent deals.

With Nestlé bowing out, Kraft’s remaining potential rivals are Hershey and Ferrero, the Italian chocolate maker, neither of which has yet presented a competing proposal.

Share Investor Links

Share Investor Blog – Stockmarket & Business commentary
Share Investor New Zealand Business News– Get more business news
Discuss this topic @ Share Investor Forum – Register free
Share Investor’s Daily Forex Updates

Recommended Amazon Reading

	The Tao of Warren Buffett: Warren Buffett’s Words of Wisdom: Quotations and Interpretations to Help Guide You to Billionaire Wealth and Enlightened Business Management by Mary Buffett Buy new: $15.61 / Used from: $6.50 Usually ships in 24 hours
	Warren Buffett’s Management Secrets: Proven Tools for Personal and Business Success by Mary Buffett Buy new: $16.50 / Used from: $11.49 Usually ships in 24 hours

From Amazon – Apple iPod touch 32 GB (3rd Generation) NEWEST MODEL

By MarketWatch

Jan. 5, 2010, 1:46 p.m. EST

READ BUFFETT’S PRESS RELEASE ON KRAFT SHARE ISSUE

SAN FRANCISCO (MarketWatch) — Kraft Foods CEO Irene Rosenfeld got an earful Tuesday, when she was told that her costly pursuit of Cadbury Plc amounts to biting off more than her company can chew.

This blunt criticism comes from none other than billionaire Warren Buffett, the usually reserved head of Berkshire Hathaway which, with a 9.4% stake, is Kraft’s biggest shareholder.

Buffett said “no” to Kraft’s request to issue new shares to finance its hostile bid for the London-based chocolate maker. It’s a rare public rebellion by Buffett, whose call for fiscal accountability counters Rosenfeld’s request for what Buffett labeled a “blank check” for the Cadbury pursuit. See Buffett’s “no” vote.

The timing is perfect. Kraft has just raised its bid for Cadbury, which in turn wasted no time rejecting it, just as it has rejected every overture from Rosenfeld since this trans-Atlantic food fight started back in September.

Sensing Buffett’s move could torpedo a deal, investors playing the takeover arbitrage sent Cadbury’s stock down 3.5%, while Kraft shares jumped 3.5%. It’s tempting to assume Kraft shares are rallying on relief that management might see the folly of pursuing Cadbury at the risk of watering down shareholder value still further.

Kraft has two more weeks to submit another offer. While Cadbury has spurned all of Kraft’s bids as unworthy, its share price has spiked 33%. And let’s face it: All that unsolicited attention can make one giddy.

But Nestle has already said it’s not interested in mounting a rival bid for Cadbury, and the other key contenders, Hershey and Italy’s Ferrero, have been sitting quietly in the wings. So if Buffett blocks the deal, Cadbury risks going back to Square 1. So do its investors.

The same goes for Kraft. In the three years Rosenfeld has led the company, her rounds of job cuts, asset sales and restructuring have yielded little growth.

Which means Buffett’s rebellion can really have it both ways: If it shuts down Kraft’s effort to take over Cadbury, it could force the company to refocus on building the business from within rather than pay top dollar for growth via acquisitions. And, at the same time, Cadbury shareholders could see Buffett’s move as a signal that Kraft’s hands are tied — that it simply can’t keep raising its offer. And if that’s the case, maybe it’s time to take what’s on the table.

Either way, Buffett can take credit for calling everyone’s bluff.

— Jim Jelter

Share Investor Links

Share Investor Blog – Stockmarket & Business commentary
Share Investor New Zealand Business News– Get more business news
Discuss this topic @ Share Investor Forum – Register free
Share Investor’s Daily Forex Updates

Recommended Amazon Reading

	Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage by Mary Buffett Buy new: $16.47 / Used from: $15.70 Usually ships in 24 hours
	The Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren E. Buffett Buy new: $26.10 / Used from: $33.05 Usually ships in 24 hours

From Amazon – Apple iPod touch 32 GB (3rd Generation) NEWEST MODEL

Posted by Neil Hume on Jan 05 13:41.

… who also delivers an almighty slapdown to Kraft.

In early afternoon trading on Tuesday, shares in the UK confectioner were hit hard – falling over 4% to 770p

The reason? Warren Buffett, who has thrown a rather big spanner in the works.

From a statement just released by Berskhire Hathway.

Omaha, NE (BRK.A; BRK.B)—Berkshire Hathaway has voted “no” on Kraft’s proposal to authorize the issuance of up to 370 million shares to facilitate the acquisition of Cadbury. Berkshire, taking into account both its own holdings and those of its pension funds, believes that the 138,272,500 Kraft shares it owns – 9.4% of the total outstanding – make it the company’s largest shareholder.

The share-issuance proposal, if enacted, will give Kraft a blank check allowing it to change its offer to Cadbury – in any way it wishes – from the transaction presented to shareholders in the proxy statement. And we worry very much that, indeed, there will be an additional change from the revision announced this morning. To state the matter simply, a shareholder voting “yes” today is authorizing a huge transaction without knowing its cost or the means of payment.

Our understanding is that Kraft must announce its final offer for Cadbury by January 19th. If we conclude at that point that the offer does not destroy value for Kraft shareholders, we will change our vote to “yes.” At this time, however, we believe no shareholder should vote “yes” when he can’t possibly know what he is voting for.

Oh dear. This is very embarrassing for Kraft – its biggest shareholder is clearly not onside as far as the Cadbury bid goes.

Buffett’s beef is that Kraft shares are a very expensive acquisition currency.

What we know with certainty, however, is that Kraft stock, at its current price of $27, is a very expensive “currency” to be used in an acquisition. In 2007, in fact, Kraft spent $3.6 billion to repurchase shares at about $33 per share, presumably because the directors and management thought the shares to be worth more.

Does the board now believe those purchases were a mistake and that Kraft’s true value is only the current price of $27 per share – and that it is therefore fine to structure a major acquisition based upon that price? Would the directors use stock as merger currency if the price were, say, $20 per share? Surely the true business value of what is given is as important as the true business value of what is received when an acquisition is being evaluated. We hope all shareholders will use this yardstick in deciding how to vote.

And all this on a day when Kraft removed Nestle from the Cadbury auction with a neat side deal.

Of course, the sale of Kraft’s North American North American frozen pizza business to the Swiss for $3.7bn goes some way to addressing Buffett’s concern; Kraft is offering Cadbury shareholders the option of receiving an extra 60p per share in cash instead of some of the Kraft shares.

But it seems this is not enough, which raises the question of whether Kraft will be forced to make further disposals – its coffee assets for example – if it wants to secure Buffett’s backing. Importantly, though, there is still time for Kraft to do this or at least make a commitment to do so.

At the moment we don’t know whether a Buffett ‘no’ vote can de-rail Kraft’s bid for Cadbury, but this post will be updated when we do. That said, it is probably worth assuming that many Kraft shareholders will follow Buffett’s lead.

Of course this could all be irrelevant because if Kraft does not increase its offer Cadbury shareholders will probably vote ‘no’ as well.

Share Investor Links

Share Investor Blog – Stockmarket & Business commentary
Share Investor New Zealand Business News– Get more business news
Discuss this topic @ Share Investor Forum – Register free
Share Investor’s Daily Forex Updates

Recommended Amazon Reading

	Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage by Mary Buffett Buy new: $16.47 / Used from: $15.70 Usually ships in 24 hours
	The Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren E. Buffett Buy new: $26.10 / Used from: $33.05 Usually ships in 24 hours

From Amazon – Apple iPod touch 32 GB (3rd Generation) NEWEST MODEL

FOR IMMEDIATE RELEASE January 5, 2010

Omaha, NE (BRK.A; BRK.B)—Berkshire Hathaway has voted “no” on Kraft’s proposal to
authorize the issuance of up to 370 million shares to facilitate the acquisition of Cadbury.
Berkshire, taking into account both its own holdings and those of its pension funds, believes that
the 138,272,500 Kraft shares it owns – 9.4% of the total outstanding – make it the company’s
largest shareholder.

The share-issuance proposal, if enacted, will give Kraft a blank check allowing it to change its
offer to Cadbury – in any way it wishes – from the transaction presented to shareholders in the
proxy statement. And we worry very much that, indeed, there will be an additional change from
the revision announced this morning.

To state the matter simply, a shareholder voting “yes” today is authorizing a huge transaction
without knowing its cost or the means of payment.

What we know with certainty, however, is that Kraft stock, at its current price of $27, is a very
expensive “currency” to be used in an acquisition. In 2007, in fact, Kraft spent $3.6 billion to
repurchase shares at about $33 per share, presumably because the directors and management
thought the shares to be worth more.

Does the board now believe those purchases were a mistake and that Kraft’s true value is only the current price of $27 per share – and that it is therefore fine to structure a major acquisition based upon that price? Would the directors use stock as merger currency if the price were, say, $20 per share? Surely the true business value of what is given is as important as the true business value of what is received when an acquisition is being evaluated. We hope all shareholders will use this yardstick in deciding how to vote.

Our understanding is that Kraft must announce its final offer for Cadbury by January 19th. If we
conclude at that point that the offer does not destroy value for Kraft shareholders, we will change our vote to “yes.”

At this time, however, we believe no shareholder should vote “yes” when he can’t possibly know
what he is voting for.

Berkshire Hathaway and its subsidiaries engage in diverse business activities including property
and casualty insurance and reinsurance, utilities and energy, finance, manufacturing, retailing
and services. Common stock of the company is listed on the New York Stock Exchange, trading
symbols BRK.A and BRK.B.

— END —
Contact
Marc D. Hamburg
402-346-1400

Share Investor Links

Share Investor Blog – Stockmarket & Business commentary
Share Investor New Zealand Business News– Get more business news
Discuss this topic @ Share Investor Forum – Register free
Share Investor’s Daily Forex Updates

Recommended Amazon Reading

	Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage by Mary Buffett Buy new: $16.47 / Used from: $15.70 Usually ships in 24 hours
	The Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren E. Buffett Buy new: $26.10 / Used from: $33.05 Usually ships in 24 hours

From Amazon – Apple iPod touch 32 GB (3rd Generation) NEWEST MODEL

By Adam Jones in London, Haig Simonian in Zurich and Alan Rappeport in New York

Published: January 5 2010 08:21 | Last updated: January 5 2010 15:51

Kraft Foods has suffered an unexpected setback in its pursuit of Cadbury after encountering opposition from Berkshire Hathaway, Warren Buffett’s investment vehicle.

Berkshire, which has a 9.4 per cent stake in Kraft, announced on Tuesday that it had voted “no” to a proposal to authorise the issue of up to 370m Kraft shares to fund its £10.7bn hostile bid for the UK-headquartered confectioner.

In an unusually-public expression of misgiving, Berkshire claimed that the measure would give the US-based food multinational a blank cheque to change its offer “in any way it wishes”.

“To state the matter simply, a shareholder voting ‘yes’ today is authorising a huge transaction without knowing its cost or the means of payment,” it said in a statement.

But even though Berkshire described Kraft stock as an expensive form of bid currency, it held out the possibility of withdrawing its opposition if it gauged that the final offer did not destroy shareholder value.

Berkshire’s intervention came just hours after Kraft announced that it had increased the cash element of its bid for Cadbury after agreeing to sell its North American frozen pizza business to Nestlé for $3.7bn.

At the same time, Nestlé declared that it would not make or participate in a rival offer for the British multinational, removing one potential source of competition to the Kraft bid, whose overall value remained unchanged.

Kraft, the maker of Oreo cookies, Philadelphia cream cheese and Milka chocolate, had originally offered 300p plus 0.2589 Kraft shares for each Cadbury share.

Using the proceeds of the frozen pizza business sale, Kraft said it would offer Cadbury shareholders the option of receiving an extra 60p per share in cash instead of some of the Kraft shares.

Kraft argued the move to increase the cash element of its offer was in response to requests from Cadbury investors.

It also said that it reflected pressure from Kraft shareholders to “be more sparing” with its own stock – a statement that gained added resonance with Berkshire’s subsequent intervention.

Cadbury’s response to the Kraft move was dismissive. “Kraft has once again missed the point. Despite this tinkering, the Kraft offer remains unchanged and derisory with less than half the consideration in cash,” it said.

Shares in Cadbury were trading 3.5 per cent lower at 776½p in late afternoon trading, still well above the 756p offer price. Kraft shares were trading 3 per cent higher at $28.25 in early US trading.

Full details of the revised offer from Kraft have not yet been announced but will be published on or before January 19, the last date upon which Kraft can amend the terms of its bid, assuming another party does not trump its offer.

Hershey, the US chocolate maker, and Ferrero International of Italy have both said that they were considering whether or not to enter the bidding for Cadbury.

Nestlé had until Tuesday declined to comment on its intentions, but analysts had speculated that the Swiss multinational could have participated in some form of counterbid for Cadbury – possibly in conjunction with Hershey.

Such speculation was aided by Monday’s announcement by Nestlé that it would receive more than $28bn for the second tranche of its shares in Alcon, the US eyecare company being sold to Novartis, the Swiss pharmaceuticals group.

However, its statement on Tuesday said: “After discussions with the UK Takeover Panel regarding the potential for further speculation… Nestlé confirms that it does not intend to make, or participate in, a formal offer for Cadbury.”

Martin Deboo, an analyst at Investec Securities, said this removed the possibility of Nestlé aiding Hershey in a bid for Cadbury. “Their [Hershey’s] most obvious friend has left the playing field,” said Mr Deboo.

However, he added that the extra cash element did not “fundamentally change the smell of Kraft’s offer”.

Nestlé said that buying Kraft’s North American frozen pizza business would significantly boost its strategy of growing in premium convenience foods.

Additional reporting by Jenny Wiggins

Share Investor Links

Share Investor Blog – Stockmarket & Business commentary
Share Investor New Zealand Business News– Get more business news
Discuss this topic @ Share Investor Forum – Register free
Share Investor’s Daily Forex Updates

Recommended Amazon Reading

	Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage by Mary Buffett Buy new: $16.47 / Used from: $15.70 Usually ships in 24 hours
	The Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren E. Buffett Buy new: $26.10 / Used from: $33.05 Usually ships in 24 hours

From Amazon – Apple iPod touch 32 GB (3rd Generation) NEWEST MODEL

By Andrew Hill

Published: January 5 2010 16:52 | Last updated: January 5 2010 16:52

Share Investor Links

Share Investor Blog – Stockmarket & Business commentary
Share Investor New Zealand Business News– Get more business news
Discuss this topic @ Share Investor Forum – Register free
Share Investor’s Daily Forex Updates

Recommended Amazon Reading

	Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage by Mary Buffett Buy new: $16.47 / Used from: $15.70 Usually ships in 24 hours
	The Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren E. Buffett Buy new: $26.10 / Used from: $33.05 Usually ships in 24 hours

From Amazon – Apple iPod touch 32 GB (3rd Generation) NEWEST MODEL

Kraft Foods’ plans to buy Cadbury have been hit by news that one of its key shareholders is wary of the bid move.

Berkshire Hathaway, the holding firm of US billionaire Warren Buffett, said it had voted against Kraft’s plans to sell new shares to help fund the takeover.

It said the share sale gave Kraft a blank cheque allowing it to change its offer “in any way it wishes”.

However, the company said it may change its vote if the final bid “does not destroy value for Kraft shareholders”.

BBC business editor Robert Peston said Kraft’s plans to buy Cadbury were now in jeopardy.

Cadbury shares fell on the news, closing 3.2% lower in London at 779 pence.

Kraft has until 19 January to announce its final offer for Cadbury.

Change fears

Roger Carr, chairman of Cadbury, told me: ‘In essence Kraft’s offer is limited by powerful Kraft shareholders restricting what they can offer’ Robert Peston, BBC business editor Read Robert’s blog in full

Kraft is planning to issue 370 million new shares in order to help finance its takeover of Cadbury.

But Berkshire Hathaway – which says it owns 9.4% of Kraft, making it the firm’s largest shareholder – says this plan will allow Kraft to alter its bid however it wishes.

“And we worry very much that, indeed, there will be an additional change from the revision announced this morning,” the firm said in a statement.

“To state the matter simply, a shareholder voting ‘yes’ today is authorising a huge transaction without knowing its cost or the means of payment.”

More cash

Earlier on Tuesday, Kraft announced it had sold its North American pizza business – which sells brands including DiGiorno and California Pizza Kitchen in the US and Canada – to Nestle for $3.7bn (£2.3bn).

KRAFT BID TIMELINE 7 Sept: Kraft tables offer for Cadbury, valuing the company at about £10bn. The bid is immediately rejected by the Cadbury board 9 Nov: Kraft goes hostile with its takeover bid, and Cadbury again rejects the offer 4 Dec: Kraft details offer aimed at Cadbury shareholders, setting 5 January deadline 14 Dec: Cadbury publishes its defence document, urging its shareholders to reject the Kraft offer 31 Dec: Deadline for shareholders to accept the Kraft bid is extended to 2 February 5 Jan: Kraft announces revised offer with higher cash proportion 15 Jan: Deadline for Cadbury to issue trading update 19 Jan: Deadline for Kraft to publish details of revised offer 2 Feb: Deadline for Cadbury shareholders to accept Kraft bid See Cadbury’s share price

It said it would use the money raised to increase the proportion of cash in its offer to Cadbury shareholders in order to make its bid more attractive.

The sale means Kraft will be able to offer an extra 60p per share in cash, though the overall value of the offer is not being increased.

Kraft’s original bid was £3 plus 0.26 new Kraft shares for each Cadbury share – a deal that analysts said would be unlikely to tempt shareholders.

The Cadbury board responded by again calling the offer “derisory”.

“Despite this tinkering, the Kraft offer remains unchanged and derisory with less than half the consideration in cash,” it said in a statement.

Few rivals

In addition to buying Kraft’s pizza business, Nestle also ruled itself out of the running to buy Cadbury.

Nestle had been linked to a possible offer, and on Monday, that speculation was fuelled when Nestle sold its remaining stake in eye-care group Alcon to Novartis for $28.1bn – a deal perceived as freeing up cash for a Cadbury bid.

In a statement, Nestle said its decision not to make, or participate in, a formal offer for Cadbury followed discussions with the UK Takeover Panel – the body in charge of regulating takeovers.

That means Kraft remains the only current bidder for Cadbury, although US confectioner Hershey has previously expressed its interest in a possible bid.

Share Investor Links

Share Investor Blog – Stockmarket & Business commentary
Share Investor New Zealand Business News– Get more business news
Discuss this topic @ Share Investor Forum – Register free
Share Investor’s Daily Forex Updates

Recommended Amazon Reading

	Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage by Mary Buffett Buy new: $16.47 / Used from: $15.70 Usually ships in 24 hours
	The Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren E. Buffett Buy new: $26.10 / Used from: $33.05 Usually ships in 24 hours

From Amazon – Apple iPod touch 32 GB (3rd Generation) NEWEST MODEL

When Buffett wants a strategic change, he generally wields his influence behind closed doors

• Andrew Clark
• guardian.co.uk, Tuesday 5 January 2010 17.13 GMT

US investor Warren Buffett has slammed Kraft board over its revised bid for Cadburys. Photograph: Andrea Comas /Reuters

The world’s second richest man, Warren Buffett, is among the most powerful figures in the American business world but it is rare for the Nebraska-based billionaire to pick a fight in public with the management of one of his favoured companies.

Renowned for his witty homilies of homespun wisdom, Buffett, whose personal fortune is estimated at $37bn (£23bn), has chunky stakes in a list of blue-chip corporations ranging from Goldman Sachs and General Electric to ConocoPhillips, Tesco, Johnson & Johnson and Swiss Re.

For all its billions of dollars of weight, his Berkshire Hathaway investment empire adopts a policy of minimal interference in boardroom decisions. Unlike an activist hedge fund, Buffett stresses that he is an investor, rather than a manager, and on the rare instances where he wants a strategic change, he generally wields his influence behind closed doors.

Justin Fuller, a Chicago investment manager who edits a website, Buffettologist, says Buffett’s public attack on Kraft‘s use of shares to bid for Cadbury is a sign that the so-called Sage of Omaha feels he is being ignored by Kraft’s board – and that his money could be misused.

“He probably would have said something privately to Kraft’s leadership and board,” said Fuller. “The fact that he went public with this is significant – it’s a shot across their bows.”

Back in 2000, Buffett was instrumental in halting a move by Coca-Cola to splash out $15.7bn on food firm Quaker Oats. As a Coke board member and investor, he argued that the move would raise competition issues and was poor value. But his behind-the-scenes opposition only emerged after Coke abandoned the takeover, clearing the way for rival Pepsi to pick up Quaker.

At his annual gathering of Berkshire Hathaway investors in Omaha, Buffett has routinely refused to intervene in corporate decisions including the construction of ecologically controversial Oregon dams by a Berkshire company, Pacificorp. Two years ago, he declined to speak out on links between PetroChina, in which Berkshire had a stake, and a parent firm that did business in war-ravaged Sudan. And he has stood firm as a shareholder in the credit rating agency Moody’s despite criticism that it spectacularly failed to see the risks inherent in mortgage-backed securities.

When it comes to matters beyond his own portfolio, Buffett is more outspoken. He demeaned Bank of America‘s former boss, Ken Lewis, as an “ironic hero” of the global financial crisis. And he threw his weight behind the US government’s programme of bank bailouts, warning that the credit crunch was an “economic Pearl Harbour” and that turmoil in the wake of the collapse of Lehman Brothers would “look like Nirvana” without congressional action.

Share Investor Links

Share Investor Blog – Stockmarket & Business commentary
Share Investor New Zealand Business News– Get more business news
Discuss this topic @ Share Investor Forum – Register free
Share Investor’s Daily Forex Updates

Recommended Amazon Reading

	Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage by Mary Buffett Buy new: $16.47 / Used from: $15.70 Usually ships in 24 hours
	The Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren E. Buffett Buy new: $26.10 / Used from: $33.05 Usually ships in 24 hours

From Amazon – Apple iPod touch 32 GB (3rd Generation) NEWEST MODEL

Robert Peston | 17:14 UK time, Tuesday, 5 January 2010

Kraft’s plans to buy Cadbury are in jeopardy, following the decision of Berkshire Hathaway to vote against its plan to issue 370m new shares to pay for the confectionery company.

Berkshire, founded by Warren Buffett, owns 9.4 per cent of Kraft. It is also probably the most respected investor in the world.

So it is embarrassing for Kraft that Berkshire will not authorise the transaction.

Berkshire has two concerns. First it says that Kraft should not be issuing shares at the current price of $27, because it sees this as a “very expensive ‘currency’”.

Second it is concerned that if it were to authorise the issue of the shares, it would in effect be authorising “a huge transaction without knowing its cost or the means of payment”.

There is a paradox here of course.

Berkshire fears that Kraft would be paying too much for Cadbury.

Whereas Cadbury’s board fears that the offer from Kraft is inadequate.

Roger Carr, chairman of Cadbury, says: “In essence Kraft’s offer is limited by powerful Kraft shareholders restricting what they can offer in stock and is constrained by Kraft’s rating agency limiting what they can offer in cash.

The so-called discipline of Kraft [in not wanting to pay more for Cadbury] is a smokescreen to justify an attempt to steal the Cadbury from its shareholders”.

Hmmm.

Unless you are a conspiracy theorist who believes that Berkshire is in cahoots with Kraft’s management to secure Cadbury at a knockdown price, you’d have to assume that the game is up – and that Cadbury will remain independent.

But would “friends” of Kraft’s board point out – as Berkshire has done – that this company spent $3.6bn on its own stock at $33 per share in 2007, presumably on the basis that $33 was too cheap for the stock, and now wants to issue shares when they are even cheaper.

These are the observations of a shareholder who doesn’t appear to have huge respect for the judgement of management.

It is therefore reasonable to assume that Berkshire really doesn’t like the look of the Cadbury takeover.

So Kraft now has till January 19 to persuade Berkshire that its price for Cadbury represents very good value and to persuade Cadbury shareholders that they are getting a fabulous price.

Those two ambitions don’t look altogether consistent.

In other words, there must be a pretty good chance that Cadbury – against prevailing opinion – will remain independent.

That said, I am not sure the penny has dropped in the market place, because if it had surely Cadbury’s share price would have fallen by more than today’s 3 per cent.

Share Investor Links

Share Investor Blog – Stockmarket & Business commentary
Share Investor New Zealand Business News– Get more business news
Discuss this topic @ Share Investor Forum – Register free
Share Investor’s Daily Forex Updates

Recommended Amazon Reading

	Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage by Mary Buffett Buy new: $16.47 / Used from: $15.70 Usually ships in 24 hours
	The Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren E. Buffett Buy new: $26.10 / Used from: $33.05 Usually ships in 24 hours

From Amazon – Apple iPod touch 32 GB (3rd Generation) NEWEST MODEL

By DANA CIMILLUCA And CECILIE ROHWEDDER

Warren Buffett waded into the takeover saga surrounding Cadbury PLC Tuesday with an unusually public move to block Kraft Foods Inc.’s issuance of shares to fund its $16 billion offer for the British confectioner.

Mr. Buffett’s move marked a sharp rebuke from Kraft’s largest shareholder and came on the same day the U.S. food giant sweetened its hostile offer for Cadbury.

The Cadbury saga, which has dragged on for four months, has suddenly become a rollercoaster. In addition to Kraft’s new offer, which raises the cash portion, and Mr. Buffett’s tart reply, potential rival Nestlé SA formally removed itself from any deal on Tuesday. Another possible bidder, Hershey Co., remains mum on its intentions.

Berkshire Hathaway Inc., Mr. Buffett’s sprawling holding company, said Tuesday that it voted “no” on Kraft’s effort to issue as many as 370 million shares to fund the cash-and-stock offer for Cadbury, which is now valued at £10.2 billion ($16.4 billion). The Berkshire statement cited a fear that Kraft will overpay in the acquisition. Berkshire said it controls about 9.4% of Kraft’s shares outstanding, making it the company’s largest shareholder.

Associated Press

Warren Buffett in November

The statement appeared to be a response to Kraft’s announcement earlier in the day that the company would amend its offer for Cadbury by increasing the cash component. The overall value of the bid didn’t change.

The sweetened bid accompanied an announcement that Kraft would sell its North American frozen-pizza business to Nestlé for $3.7 billion. Kraft said it would use net proceeds from the Nestlé deal, which it estimates at 60 pence (97 U.S. cents) per Cadbury share, to give Cadbury shareholders a “partial cash alternative” to its existing offer, which had been made up of 60% Kraft stock and 40% cash.

Both Kraft and Cadbury shareholders have a say on whether the deal happens. Kraft shareholders will vote on Feb. 1—a vote that will now take place with Mr. Buffett’s warning ringing in their ears.

“The share-issuance proposal, if enacted, will give Kraft a blank check allowing it to change its offer to Cadbury—in any way it wishes,” Berkshire said.

A number of investors scratched their heads at the statement, given that, according to a timetable set out by U.K. takeover authorities, Kraft has until Jan. 19 to raise its offer—meaning that they will know by then what they are voting on.

Cadbury swiftly rejected the revised bid, a stance it has taken since early September. “Kraft has once again missed the point,” a Cadbury spokesman said. “Despite this tinkering, the Kraft offer remains unchanged and derisory with less than half the consideration in cash.”

In a statement, Kraft said it takes Mr. Buffett’s opinion seriously. “We agree that Kraft Foods shares are deeply undervalued and we would certainly not do anything that hurts shareholder value,” said a spokeswoman. “We intend to remain disciplined in this process.”

John Haynes, head of U.K. equity research at Rensburg Sheppards Investment Management Ltd. in London, said he would recommend his firm’s clients reject Kraft’s new offer. “It’s not really improved. It was 740 before, it is 740 today, which is massively too low as a starting point,” he said. “There is a tiny bit more cash and you give up some shares, but most of our shareholders don’t want Kraft shares anyway.”

Rensburg Sheppards manages individual, segregated trading accounts for private clients, many of which contain Cadbury shares. As of November, the firm accounted for 4.7 million Cadbury shares, according to LionShares.

Tuesday’s moves put the Cadbury sweepstakes in better focus. Kraft remains the only declared suitor, but one under pressure to improve its offer. Nestlé, meanwhile, formally removed itself from the running for Cadbury for the first time. Still weighing its options is Hershey, the U.S. chocolatier that has been considering a bid. Italy’s Ferrero SpA has said it is considering its options with regard to Cadbury but the odds that it will launch a full-blown bid of its own are low.

Kraft’s offer was 745 pence per share when the Northfield, Ill., company made it official in early November. That included 300 pence in cash. Cadbury’s share price fell on the news that Nestlé, which had been considered the potential suitor with the greatest ability to trump Kraft, won’t be making a bid for the company, and as a result of the pressure on Kraft from Mr. Buffett not to overpay.

Cadbury shares fell 3.6% to 776 pence in Tuesday afternoon trading in London. That is still above the Kraft offer price, indicating investors will follow Cadbury management’s cue and reject the offer unless Kraft raises it. That could now be more difficult given Mr. Buffett’s latest missive.

Berkshire, which holds about 138.3 million Kraft shares, said “we worry very much that, indeed, there will be an additional change from the revision announced this morning. What we know with certainty, however, is that Kraft stock, at its current price of $27, is a very expensive ‘currency’ to be used in an acquisition.” It added: “In 2007, in fact, Kraft spent $3.6 billion to repurchase shares at about $33 per share, presumably because the directors and management thought the shares to be worth more.”

Berkshire did note that Kraft has two weeks to announce a final offer for Cadbury. “If we conclude at that point that the offer does not destroy value for Kraft shareholders, we will change our vote to ‘yes’” on the share-issuance plan.

Cadbury plans to report its latest results on Jan. 15, when it will once again explain its reasons for rejecting the offer. Kraft is expected to wait until it sees those results before putting in any new offer.

By selling the pizza business, Kraft is giving up one of its top growing units. Among its brands are Tombstone, California Pizza Kitchen and DiGiorno. In announcing the deal with Nestlé Tuesday, Kraft said it would use proceeds for “deleveraging to maintain its investment grade credit rating.”

Nestlé on Monday had bolstered its own coffers by selling its stake in eye-care company Alcon Inc. to Swiss drug maker Novartis AG for $28.1 billion in cash. As part of Tuesday’s announcement, Nestlé said “it does not intend to make, or participate in, a formal offer for Cadbury,” officially taking itself out of the running for Cadbury for the first time.

That leaves Hershey as the most likely counter bidder. People familiar with the matter have said that Hershey is considering such a move, though it wasn’t expected to make a decision before Kraft puts its final offer on the table as part of the 60-day timetable.

Kraft Pursues Cadbury

See how these global brands have evolved.

Still, Hershey’s ability to make an offer is constrained. The Pennsylvania company is smaller than Cadbury and making an offer would jeopardize its credit rating and risk massive dilution for its shareholders.

Kraft, by Wednesday morning, is expected to detail for the first time the level of acceptances it has received so far from Cadbury shareholders. Cadbury shareholders have until Feb. 2 to tender their shares —unless another suitor emerges, which could extend the timeframe.

—Tess Stynes contributed to this article.

Share Investor Links

Share Investor Blog – Stockmarket & Business commentary
Share Investor New Zealand Business News– Get more business news
Discuss this topic @ Share Investor Forum – Register free
Share Investor’s Daily Forex Updates

Recommended Amazon Reading

	Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage by Mary Buffett Buy new: $16.47 / Used from: $15.70 Usually ships in 24 hours
	The Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren E. Buffett Buy new: $26.10 / Used from: $33.05 Usually ships in 24 hours

From Amazon – Apple iPod touch 32 GB (3rd Generation) NEWEST MODEL

Jan. 5, 2010, 12:50 p.m. EST ·

By Alistair Barr, MarketWatch

Investor usually backs management, but issues strong worded statement

SAN FRANCISCO (MarketWatch) — Berkshire Hathaway Inc. Chairman Warren Buffett likes to invest in good businesses with great managers, and then lets them get on with it. But the famed investor broke with that approach Tuesday by publicly criticizing Kraft Foods Inc.

In particular, the investor singled out Kraft’s /quotes/comstock/13*!kft/quotes/nls/kft (KFT 28.37, +0.94, +3.41%) plan to sell new shares to help pay for its attempted acquisition of industry rival Cadbury PLC /quotes/comstock/23s!a:cbry (UK:CBRY 779.00, -26.00, -3.23%) /quotes/comstock/13*!cby/quotes/nls/cby (CBY 49.80, -1.85, -3.58%) . Read more about Buffett’s refusal to support Kraft plan.

Berkshire /quotes/comstock/13*!brk.a/quotes/nls/brk.a (BRK.A 99,691, +91.00, +0.09%) /quotes/comstock/13*!brk.b/quotes/nls/brk.b (BRK.B 3,318, +6.99, +0.21%) issued a statement noting that it is Kraft’s largest shareholder, and argued that the plan to issue new stock would “give Kraft a blank check” to change its Cadbury offer.

Berkshire also criticized Kraft’s board of directors, which authorized a $3.6 billion stock buyback in 2007 at $33 each, and is now allowing the company to issue new shares at the current price of $27.

“Does the board now believe those purchases were a mistake and that Kraft’s true value is only the current price of $27 per share — and that it is therefore fine to structure a major acquisition based upon that price?” Berkshire wrote in its statement.

“It’s very unusual for Buffett to do this,” said Whitney Tilson, head of hedge-fund firm T2 Partners LLC and a Berkshire investor. “It’s unusual both in that Berkshire did this at all and in the very strong wording of the statement.”

‘I’m not sure whether this represents a shift to a more activist Warren Buffett. I hope so.’

Whitney Tilson, T2 Partners

Stepping up?

Berkshire’s main strategy has been to buy or invest in businesses run by talented and trustworthy managers and then remain mostly on the sidelines.

Even when Buffett was on the board of companies in which Berkshire invested, he often stood by when those companies were working in ways that he may not have agreed with, Tilson noted, citing Gillette’s $7 billion acquisition of battery maker Duracell in 1996.

“I’m not sure whether this represents a shift to a more activist Warren Buffett. I hope so,” added Tilson, who’s investment firm owns Kraft shares as well as Berkshire stock.

Another shareholder of Berkshire and Kraft said he was “elated” when he heard the news about Buffett on Tuesday.

“We were frustrated and were wondering how to stop this bidding war getting out of control,” said Jeff Auxier, manager of the Auxier Focus Fund. “Finally [Buffett is] stepping up and saying that these prices make no sense.”

Shareholders often have no constituency to protect their common interest. But in this instance, Buffett is using Berkshire’s large stake in Kraft and a public statement to rally other investors to a common cause, according to Auxier. “CEOs overpay, over-borrow and destroy shareholder value and a lot of big shareholders do nothing. People wonder why you’ve had negative returns on the S&P 500 Index /quotes/comstock/21z!i1:in\x (SPX 1,133, -0.09, -0.01%) over the past decade. Just look at the valuation of deals like AOL Time Warner.”

If Kraft ends up buying Cadbury at a high price, the company’s shares will underperform the market for five years, Auxier warned. “We’ve seen this time and time again. It gets to be a problem of CEO ego vs. shareholder value.”

Behind the scenes

Another longtime Berkshire investor said it’s not unusual for Buffett to actively protect its investments from value-destroying actions such as issuing lots of new stock to overpay for acquisitions.

“Berkshire’s ideal is a world in which there are lots of great businesses and it goes along passively as an investor,” said Thomas Russo, a partner at Gardner Russo & Gardner. “But the world often doesn’t provide that, so you have to do more to get what you want sometimes.”

When the Coca-Cola Co. /quotes/comstock/13*!ko/quotes/nls/ko (KO 56.29, -0.75, -1.31%) was considering buying Gatorade, media reports at the time suggested that Buffett was behind the scenes trying to persuade the company not to overpay for the sports-drink maker, Russo noted. Rival PepsiCo /quotes/comstock/13*!pep/quotes/nls/pep (PEP 61.88, +0.64, +1.04%) ended up winning Gatorade through its $13 billion acquisition of Quaker Oats in late 2000. “Berkshire has been increasingly outspoken on the need for shareholders to speak up about corporate action and corporate governance,” he added.

Berkshire’s statement on Tuesday suggests Buffett thinks that Kraft is more undervalued than the benefit of the discount they will get by buying Cadbury, according to Russo. “Berkshire is choosing not to give up the attractive discount on Kraft shares simply to get an acquisition of Cadbury, where the shares may or may not be trading at a discount according to Berkshire’s calculations. It’s not unusual for Berkshire to have a discussion about what they’re getting and giving up.”

‘Good cop, bad cop’

Buffett’s statement also may be interpreted as an attack on Kraft executives, but the company’s management could use it to their advantage, Tilson said. “Kraft management can use this to play ‘good cop, bad cop.’ They can say, ‘Look, this is our final offer because if we pay any more our shareholders will vote against it.’

“‘Enough is enough, take it or leave it.’ That’s what Buffett is saying,” he added.

Alistair Barr is a reporter for MarketWatch in San Francisco.

Share Investor Links

Share Investor Blog – Stockmarket & Business commentary
Share Investor New Zealand Business News– Get more business news
Discuss this topic @ Share Investor Forum – Register free
Share Investor’s Daily Forex Updates

Recommended Amazon Reading

	Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage by Mary Buffett Buy new: $16.47 / Used from: $15.70 Usually ships in 24 hours
	The Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren E. Buffett Buy new: $26.10 / Used from: $33.05 Usually ships in 24 hours

From Amazon – Apple iPod touch 32 GB (3rd Generation) NEWEST MODEL

January 04, 2010, 12:16 AM EST

By Andrew Frye

Jan. 4 (Bloomberg) — Warren Buffett recorded his worst performance against the stock market in a decade last year after committing $26 billion to a railroad takeover and lowering his expectations for investment returns.

Berkshire Hathaway Inc., the company Buffett has led as chairman for more than four decades, advanced 2.7 percent on the New York Stock Exchange in 2009, less than the 23 percent return in the Standard & Poor’s 500 Index. It was Berkshire’s worst showing since falling 20 percent in 1999, compared with a 20 percent gain in the index. Berkshire beat the index in 15 of the last 22 years.

Buffett, whose acquisitions and stock picks propelled Omaha, Nebraska-based Berkshire’s 30-fold increase in 20 years, is finding it harder to duplicate those returns as his company expands. The purchase of Burlington Northern Santa Fe Corp., announced in November, wasn’t “cheap,” Buffett said. The deal adds another business, along with luxury flights and manufactured housing, that suffers when the economy falters.

“This isn’t your father’s Berkshire,” said Jeff Matthews, the author of “Pilgrimage to Warren Buffett’s Omaha” and founder of the hedge fund Ram Partners LP. “It’s a protector of wealth and hopefully steady growth, but very dependent on the economy in ways that it hasn’t been in the past.”

Buffett, 79, won global renown as the “Oracle of Omaha” for stock picks, including Capital Cities/ABC Inc. in the 1980s and PetroChina Inc. in 2003, that produced multibillion-dollar gains. Berkshire doesn’t pay dividends or buy back stock, and Buffett’s main occupation as the company’s chief executive officer is deciding where to invest earnings from a portfolio of operating companies and securities.

Railroad Investment

The Burlington Northern deal, which Buffett calls an “all- in wager” on the U.S. economy, brings Berkshire 37,000 workers and a share of a regulated industry. Berkshire expects to own the railroad for the next century and get “a decent return,” Buffett said in a November interview with Charlie Rose on PBS.

“Reasonable return is good enough,” Buffett said in the interview. “You know, 50 years ago I was looking for spectacular returns, but I can’t get ‘em.”

Berkshire’s performance against the S&P 500 has slipped even according to Buffett’s favorite metric, book value per share. The measure of assets minus liabilities, which Buffett says most closely indicates a firm’s value, trailed the index three times in the 10 years through 2008 after lagging just three times in the previous 34. In the first nine months of 2009, Berkshire’s book value-per share gain trailed the S&P 500 again, 15 percent to 17 percent.

Outlook for Profit

Berkshire’s annual profits may return to growth this year, according to an estimate by Meyer Shields, an analyst at Stifel Nicolaus & Co. Profit, which fell by more than half in 2008, may rise 51 percent to $7.55 billion, according to Shields. Berkshire reported record profit of $13.2 billion in 2007.

Buffett, the second-richest American, positioned Berkshire to weather the contraction in the U.S. economy by stockpiling $44 billion in cash. Starting in 2008, when corporate borrowing costs surged, he drew on that hoard to finance Goldman Sachs Group Inc., General Electric Co., Swiss Reinsurance Co. and the Mars Inc. takeover of chewing-gum maker Wm. Wrigley Jr. Co.

Those transactions are paying coupons that helped boost investment income in the first nine months of the year. Still, losses at Berkshire’s NetJets subsidiary and earnings declines at Clayton Homes contributed to a pretax profit plunge of more than half to $1.57 billion at Berkshire’s manufacturing, service and retailing businesses.

“Many of Berkshire’s businesses were perhaps hit worse” than companies in the S&P 500, said Guy Spier, a principal at hedge fund Aquamarine Funds LLC, which owns Berkshire shares. “They have a huge exposure to the housing market; NetJets has been impacted.”

–Editors: Dan Reichl, Dan Kraut

Share Investor Links

Share Investor Blog – Stockmarket & Business commentary
Share Investor New Zealand Business News– Get more business news
Discuss this topic @ Share Investor Forum – Register free
Share Investor’s Daily Forex Updates

Recommended Amazon Reading

	Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage by Mary Buffett Buy new: $16.47 / Used from: $15.70 Usually ships in 24 hours
	The Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren E. Buffett Buy new: $26.10 / Used from: $33.05 Usually ships in 24 hours

From Amazon – Apple iPod touch 32 GB (3rd Generation) NEWEST MODEL

This article posted on January 4, 2010 at 11:30 am

US food giant Kraft is set to up its £10billion hostile takeover bid for Birmingham-based Cadbury in the next two weeks, it emerged today.

The sweetened offer will be the last effort to entice the Dairy Milk-maker’s shareholders into backing a takeover, according to reports. Kraft’s current offer lapses tomorrow.

But it will almost certainly be rejected because it is more than 60p below Cadbury’s current share price, which values the Bournville business in Birmingham at £10.9 billion.

Cadbury chairman Roger Carr last month accused Kraft of trying to buy the Creme Egg maker “on the cheap”, and warned shareholders not to let the US firm “steal your company with its derisory offer”.

The US firm – behind the Toblerone bars and Terry’s chocolate orange brands – will have to raise its offer by January 19 unless a rival bidder enters the fray.

Fellow US confectioner Hershey and Italian chocolate company Ferrero are both considering their options over Cadbury, although they have yet to make a formal approach.

Cadbury, which employs around 2,500 in the West Midlands, has emphasised its credentials as a stand-alone business by lifting long-term performance targets and producing better-than-expected profit margins for the current year.

Kraft – labelled a “low-growth conglomerate” by Cadbury – has meanwhile been warned not to overpay for the company by its biggest investor, billionaire Warren Buffet.

Kraft is likely to wait until Cadbury’s trading update due on January 15 before making a final decision on whether to raise its offer. It could also increase the cash portion of its bid to make a deal more attractive to Cadbury shareholders.

Although nearly half of Cadbury’s shareholders are based in the US.

Cadbury will release its final defence arguments on January 12.

Share Investor Links

Share Investor Blog – Stockmarket & Business commentary
Share Investor New Zealand Business News– Get more business news
Discuss this topic @ Share Investor Forum – Register free
Share Investor’s Daily Forex Updates

Recommended Amazon Reading

	Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage by Mary Buffett Buy new: $16.47 / Used from: $15.70 Usually ships in 24 hours
	The Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren E. Buffett Buy new: $26.10 / Used from: $33.05 Usually ships in 24 hours

From Amazon – Apple iPod touch 32 GB (3rd Generation) NEWEST MODEL