{"id":206365,"date":"2010-01-21T00:01:00","date_gmt":"2010-01-21T05:01:00","guid":{"rendered":"tag:blogger.com,1999:blog-3087194156628161158.post-4684854311422707779"},"modified":"2010-01-21T00:08:11","modified_gmt":"2010-01-21T05:08:11","slug":"financial-times-blog-irene-rosenfeld%e2%80%99s-reckless-defiance-of-warren-buffett","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/206365","title":{"rendered":"FINANCIAL TIMES BLOG: Irene Rosenfeld\u2019s reckless defiance of Warren Buffett"},"content":{"rendered":"

January 21, 2010 1:54am<\/p>\n

<\/span><\/p>\n

\"Fishpond\"<\/a>
<\/span>SPONSOR<\/span><\/p>\n

Back to Irene Rosenfeld, who despite her degree in psychology<\/a>, appears to have upset an awful lot of people with Kraft\u2019s \u00a311.6bn takeover of Cadbury.<\/p>\n

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Having made herself unpopular<\/a> in the UK by acquiring the maker of Cadbury\u2019s Dairy Milk and the Curly Wurly<\/a>, she has alienated Warren Buffett<\/a>, her biggest shareholder, who regards it as \u201ca bad deal\u201d.<\/p>\n

When pressed in a CNBC interview <\/a>about his views on her, he damned her with faint praise:<\/p>\n

\n

\u201cI think Irene has done a good job in operations. I like Irene. I mean, she\u2019s been straightforward with me. We just disagree. She thinks it\u2019s a good deal. I think it\u2019s a bad deal. I think she\u2019s a decent person. She could be a trustee under my will. I just don\u2019t want her making this particular deal.\u201d<\/p>\n<\/blockquote>\n

Ms Rosenfeld has put herself far out on a limb – Mr Buffett\u2019s objections extend not only to the price she paid but her sale of \u201ca very fine pizza business\u201d to Nestle to raise money.<\/p>\n

His calculation of the lack of value for Kraft in the deal is worth reading in full because it gives a good idea of how a true value investor thinks.<\/p>\n

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\u201cNow they mentioned paying 13 times Ebitda for Cadbury, but they\u2019re paying more than that. For one thing, Ebitda is not the same as earnings. Depreciation is a very real expense. But on top of that, they\u2019ve got a billion-three they\u2019re going to spend of various rearrangements of Cadbury. They\u2019ve got 390 million dollars of deal expenses. They are using their own stock, 260 million shares or something like that, that their own directors say is significantly undervalued. And when they calculate that 13, they\u2019re calculating Kraft at market price, not at what their own directors think the stock is worth. So, the actual multiple, if you look at the value of the Kraft stock, is more like 16 or 17 and they sold earnings at nine times. So, it\u2019s hard to get rich doing that. And I\u2019ve got a lot of doubts about the deal.\u201d<\/p>\n<\/blockquote>\n

Ouch.<\/p>\n

As Mr Buffett says, he is not getting a chance to vote on the deal as a Kraft shareholder, but I cannot think this is the last Ms Rosenfeld will hear of it.<\/p>\n

Determination is a good quality, but ignoring the world\u2019s most venerable shareholder is not what I would call wise career tactics.<\/p>\n

Related Links<\/span><\/p>\n

CNBC VIDEO: Becky Quick One-On-One with Warren Buffett – 21\/01\/10<\/a><\/p>\n

Share Investor Links<\/span><\/a><\/a><\/p>\n

Share Investor Blog<\/a> – Stockmarket & Business commentary
Share Investor New Zealand Business News<\/a>– Get more business news
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Recommended Amazon Reading<\/span><\/p>\n\n\n\n\n
\"The<\/a><\/td>\nThe Tao of Warren Buffett: Warren Buffett’s Words of Wisdom: Quotations and Interpretations to Help Guide You to Billionaire Wealth and Enlightened Business Management<\/a> by Mary Buffett<\/span>
Buy new: $15.61 \/ Used from: $5.84
Usually ships in 24 hours<\/span><\/td>\n<\/tr>\n
\"Warren<\/a><\/td>\nWarren Buffett on Business: Principles from the Sage of Omaha<\/a> by Richard J. Connors<\/span>
Buy new: $16.47 \/ Used from: $12.40
Usually ships in 24 hours<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n