Kraft Squeezed into a Box with Buffett Lukewarm on its Pursuit of Cadbury
Kraft’s (KFT) effort to acquire Cadbury (CBRY) got more complicated today as the UK confectioner heaped scorn on Kraft’s slightly sweetened offer, while Kraft shareholder Berkshire Hathaway took steps to discourage a higher Kraft bid.
No sooner had Nestle (NESN) cleared the way for Kraft by declining to bid, than Berkshire Hathaway voted against Kraft’s proposal to issue shares to finance part of the $16.5 billion bid, saying it was worried it gave Kraft a “blank check” to raise the bid even higher.
“We worry very much that, indeed, there will be an additional change from the revision announced this morning,” Berkshire said in its statement, according to Reuters
Buffett had already warned Kraft against paying too much for Cadbury, and investors said the new statement was a clear signal 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.”
Some analysts still believe that another suitor may emerge.
“We think that Hershey is keen to make a deal with Cadbury,” analysts at Numis stockbrokers wrote in a research note. “In reality Nestle is acting as a fund provider to the Cadbury deal and we would not be surprised to see the Swiss group play that role again by buying assets from Hershey, the KitKat brand in the U.S. being an obvious candidate.”
Dean Best at Just Food writes that “with uncertainty surrounding the prospect of any move from Hershey and Ferrero and Berkshire and Buffett’s disquiet over Kraft’s bid – the only one on the table – could mean that the odds have shifted, ever so slightly, towards Cadbury staying independent.”
For latest analyst comment see Alacra Pulse.
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