Breaking News on Food & Beverage Development - North AmericaEU edition | Asian edition

News > Suppliers

Kraft’s largest shareholder votes against Cadbury bid

2 commentsBy Caroline Scott-Thomas , 06-Jan-2010

Kraft’s largest shareholder Berkshire Hathaway, run by billionaire investor Warren Buffett, has voted against the issuance of up to 370m shares to acquire Cadbury, it said on Tuesday.

The holding company owns 138m Kraft shares, or 9.4 percent of Kraft’s stock, but Buffett indicated that the company has voted ‘no’ to the issuance of shares in the $16bn cash-and-stock offer.

“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,” he said in the statement.

Buffett’s announcement of the company’s position came the same day that Kraft announced the sale of its North American pizza business to Nestlé in order to increase the cash component of its offer for the British confectioner, in exchange for part of the share component. Kraft said it made the decision due to calls from Cadbury shareholders to increase the cash element, as well as calls from its own shareholders – like Buffett – “to be more sparing in its use of undervalued Kraft Foods shares as currency for the offer.”

Kraft shareholders still have until February 1 to vote on whether they want up to 370m common shares to be included in the deal.

Buffett said he believes that the Kraft share price is undervalued at present.

“Kraft stock, at its current price of $27, is a very expensive "currency" to be used in an acquisition,” he said. “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.”

However, he added that if Kraft’s final offer for Cadbury, due on January 19, “does not destroy value for Kraft shareholders”, Berkshire Hathaway would change its vote to a ‘yes’.

2 comments (Comments are now closed)

Kraft takeover bid for Cadburys

I wish to register my vote against the takeover of Cadburys by Kraft for all reasons given in the media. Our heritage going plus they will not keep their promises to keep the production in Bournville or keep our workers. If Cadburys are making a considerable profit then they do not need to sell and this is bully tactics to swallow up a good product with a marvellous reputation. They will kill this reputation and Cadburys may end up exactly like Terrys of York!!!

Report abuse

Posted by Pamela Parkes
25 January 2010 | 12h28

COCK UP?

It doesn't seem that Kraft has given much consideration to some fairly standard business and cultural elements in pursuing this latest attempted conquest. The share price issue has been raised before, and was seemingly ignored before Buffet's influential involvement. Now they're selling a lucrative part of the current empire to help win leverage/approval for the Cadbury bid?! Is this really a good business move for Kraft ... or is it now a corporate giant's effort to salvage pride after initial rejection? I'm inclined to think the latter. If correct, not sure that I'd want to invest in them in the future. They at least owe existing shareholders a hell of an explanation!

Report abuse

Posted by Dennis
08 January 2010 | 16h40

Related products

Key Industry Events

 

Access all events listing

Our events, Events from partners...