{"id":143618,"date":"2010-01-05T23:58:00","date_gmt":"2010-01-06T04:58:00","guid":{"rendered":"tag:blogger.com,1999:blog-3087194156628161158.post-7152549892127305397"},"modified":"2010-01-06T00:01:35","modified_gmt":"2010-01-06T05:01:35","slug":"businessweek-buffett-reins-in-kraft-recalling-coke%e2%80%99s-retreat-on-quaker-oats","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/143618","title":{"rendered":"BUSINESSWEEK: Buffett Reins In Kraft, Recalling Coke\u2019s Retreat on Quaker Oats"},"content":{"rendered":"

January 05, 2010, 08:09 PM EST<\/span> <\/p>\n

By Andrew Frye<\/p>\n

Jan. 6 (Bloomberg) — Warren Buffett, the billionaire investor who helped scuttle Coca-Cola Co.\u2019s bid for Quaker Oats 10 years ago, is restraining Kraft Foods Inc. in its quest to acquire Cadbury Plc.<\/p>\n

Buffett\u2019s Berkshire Hathaway Inc., Kraft\u2019s 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 \u201cblank check\u201d for the deal, Berkshire said yesterday.<\/p>\n

\u201cI think Buffett\u2019s got it nailed,\u201d said Donald Yacktman, founder of Yacktman Asset Management Co., which holds Kraft shares. \u201cKraft is hemmed in — there\u2019s only so much they\u2019re going to be able to do to make this acquisition.\u201d<\/p>\n

Buffett, who has said shareholders must act like owners, urged caution in negotiations after Cadbury rejected Kraft\u2019s 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\u2019s preeminent investor.<\/p>\n

Berkshire said it may support a Cadbury takeover if it concludes this month that the final offer \u201cdoes not destroy value for Kraft shareholders.\u201d Buffett\u2019s assistant, Carrie Kizer, said the company had no comment.<\/p>\n

\u201cIf he says no, everybody else is going to pile on and say no too,\u201d said Justin Fuller, a partner at Midway Capital Research & Management who runs the buffettologist.com Web site.<\/p>\n

Disagreed With Coke<\/p>\n

Buffett was the most vocal dissenter on Coca-Cola\u2019s board when directors met in 2000 to discuss a $15.3 billion bid for Quaker Oats, the maker of Gatorade, Cap\u2019n 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.<\/p>\n

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\u2019s company also holds the biggest stakes in American Express Co. and Wells Fargo & Co.<\/p>\n

\u201cIt\u2019s unusual for Berkshire to put out any sort of comment like this publicly,\u201d said Glenn Tongue, a partner at T2 Partners LLC, which holds investments in Omaha, Nebraska-based Berkshire and Kraft. Buffett\u2019s opposition to a stock sale may prevent Kraft from overbidding, he said. \u201cAs a shareholder, I love seeing this,\u201d he said.<\/p>\n

Buffett\u2019s Record<\/p>\n

Buffett won a global following as the \u201cOracle of Omaha\u201d by profiting from investments in out-of-favor companies and firms he believes have unassailable advantages, including See\u2019s 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.<\/p>\n

\u201cI\u2019m not surprised that Berkshire would resist issuing shares,\u201d said Tom Russo, partner at Gardner Russo & Gardner, which holds Berkshire, Cadbury and Vevey, Switzerland-based Nestle. Buffett \u201chas had the longstanding belief that equity capital is very scarce.\u201d<\/p>\n

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\u2019s largest food company.<\/p>\n

\u2018Expensive\u2019 Shares<\/p>\n

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\u2019s stake at more than $3.9 billion.<\/p>\n

Buffett said in the statement that Kraft shares were \u201cvery expensive \u2018currency\u2019\u201d 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 \u201chave to do a lot of things right to justify this price,\u201d Buffett said in September on CNBC.<\/p>\n

\u201cWe agree that Kraft Foods shares are deeply undervalued,\u201d the foodmaker said in a statement. \u201cWe intend to remain disciplined in this process.\u201d<\/p>\n

–With assistance from Duane Stanford in Atlanta. Editors: Dan Kraut, Dan Reichl<\/p>\n


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