BILLIONAIRE investor Warren Buffett yesterday put a spanner in the works of Kraft’s hostile bid for confectioner Cadbury, voting against plans to issue new shares to fund the acquisition and claiming the current bid structure fundamentally undervalues the US firm’s stock.
Buffett’s Berkshire Hathaway firm, which owns a 9.4 per cent stake in Kraft, said the issuance of up to 370m shares, worth around $16bn (£10bn) would give the company “a blank cheque allowing it to change its offer to Cadbury – in any way it wishes”.
“We worry very much that, indeed, there will be an additional change from the revision announced this morning,” it added in a statement.
Buffett’s position came as a heavy blow to Kraft, which yesterday sealed a deal to sell its frozen pizza business for $3.7bn (£2.3bn) to Swiss firm Nestlé, which yesterday ruled itself out of a bidding war for Cadbury.
Kraft said it would use the net proceeds from the sale to provide a cash alternative to some of the shares up for grabs in its current offer. It has raised the cash component of its offer by 60p to 360p per share and cut the share element to match.
Kraft’s original deal, which has been rejected by Cadbury, was 300p cash plus 0.2589 new Kraft shares for each Cadbury share.
The US food giant has until 19 January to improve its offer for Cadbury or walk away, under a Takeover Panel deadline.
Buffett said yesterday he reserved the right to change his vote in favour of the share issuance proposal if the revised offer “does not destroy value for Kraft shareholders”.
But he said Kraft stock at its current price is “a very expensive ‘currency’ to be used in an acquisition”.
Buffett’s dissidence spooked Cadbury shareholders yesterday, sending the stock tumbling 3.2 per cent to 779p on fears the veteran investor’s influence would sway other Kraft shareholders into voting against the proposal.
Kraft investors have until 1 February to vote on the share issuance, which requires a straightforward majority to be passed providing shareholders representing at least 50 per cent of the stock have come forward to vote.
“Buffett is our largest investor and one of the most respected investors in the world so of course we take his opinion seriously,” said a Kraft spokesman.