Remember those conspiracy theories about Warren Buffett being in league with Kraft to drive down the Cadbury share price?
They always seemed somewhat far fetched – and guess what? They were.
Buffett’s threat to vote against the deal was real enough. From CNBC, via Bloomberg:
BUFFETT SAYS HE’D VOTE NO ON KRAFT OFFER IF GIVEN CHANCE.
Sadly Buffett won’t be getting a vote on the deal because, as FT Alphaville noted on Tuesday, Kraft has structured the deal so there won’t be a shareholder vote. That’s amazing — given the size of the deal — but true.
Anyway, back to Buffett:
“I think it’s a bad deal,” he said on the business news network today. “I have a lot of doubts.”
Kraft said this month it would sell pizza brands including DiGiorno and Tombstone to Nestle SA and use proceeds from the $3.7 billion deal to boost the cash component of its Cadbury bid. Buffett said that he considers the pizza deal to be valued at $2.7 billion because of tax considerations.
“Giving up a business that makes $280 million a year for $2.7 billion, I think that’s a mistake,” Buffett said. Kraft used an “enormously tax-inefficient way” for the sale.
Ouch.
The question is what Buffett does now; at the moment he has no plans to dump his holding:
BUFFETT TELLS REPORTERS HE HAS NO PLANS TO SELL KRAFT FOODS INC <KFT.N> STOCK.
But make no mistake – the Sage of Omaha is not happy with this transaction, even if he still likes Kraft boss Irene Rosenfeld:
“Irene has done a good job in operations, I like Irene,” Buffett told CNBC. “She has been very straightforward with me, we just disagree. She thinks it’s a good deal, and I think it’s a bad deal.”
Related link:
Buffett hits at Kraft’s ‘bad’ Cadbury deal – FT