Warren Buffett Still Doesn’t Like the Kraft-Cadbury Deal

Image: Lucid Investing

The Oracle of Omaha, though he had some say behind Kraft sweetening its Cadbury deal, still doesn’t like it. The New York Times reports:

“I’ve got a lot of doubts about the deal,” (Mr. Buffett) told CNBC’s Becky Quick.

As before, Mr. Buffett’s concern remains the use of Kraft stock to pay for the now $19 billion deal. Even though Kraft has raised the level of cash and lowered the amount of stock it will use for the transaction, the Berkshire Hathaway chief said that he still considers the company’s shares undervalued. Issuing new shares at their current price to him is a loss of value.

Kraft said that it had structured the acquisition so that it will no longer need shareholder approval to issue the necessary new stock. That’s a good thing, because Mr. Buffett said that if given the chance, he would vote down the proposal. He also criticized Kraft’s deal to sell its North American frozen pizza business to Nestle for $3.7 billion, a sale that raised additional cash for its Cadbury bid. To Mr. Buffett, the transaction was again at too low a price.

Still, he refused to personally criticized Kraft’s chief executive, Irene B. Rosenfeld. “She’s a decent person,” he said, adding that he has cordial relations with her.

In the interview, Buffett added, “I feel poor now,” according to the Wall Street Journal. Buffett’s “poor” is relative, but, as Kraft’s biggest shareholder, he has a right to express his disdain. He’s also keeping his stake in Kraft, so he must still have some faith in the company, despite its disobedience.

Written by Drea Knufken

Currently, I create and execute content- and PR strategies for clients, including thought leadership and messaging. I also ghostwrite and produce press releases, white papers, case studies and other collateral.