Warren Buffett, the billionaire investor andKraft’s biggest shareholder, has attacked the US food group’s £11.6bn ($18.9bn) agreed takeover ofCadbury, saying it was “a bad deal” that he would vote against if he could.
His comments, in an interview with CNBC on Wednesday, coincided with a downgrade of Kraft’s credit rating by Fitch and sent shares in the company lower. The legendary investor said: “If I had a chance to vote on this, I’d vote no...I have a lot of doubts about this deal.”
Some Kraft and Cadbury shareholders voiced support for the takeover, but others, such as Legal & General Investment Management, were disappointed by the bid, which values the confectioner at 850p per share.
Mr Buffett, who holds more than 9 per cent of Kraft, said he felt “poor” following the Cadbury deal because it came with $1.3bn (£798m) of reorganisation costs and $390m of deal fees. He was also unhappy with the sale of Kraft’s “very fine pizza business” this month toNestlé.
This month, he called Kraft’s use of stock in the Cadbury deal “very expensive currency”, suggesting that Kraft was worth more than its current share price, which was down 2.5 per cent at $28.68 in afternoon trading in New York on Wednesday.
It is a blow for Irene Rosenfeld, Kraft’s chief executive, who hoped her final offer of 60 per cent cash would assuage Mr Buffett’s fears of giving Cadbury investors too much stock. Mr Buffett’s comments are unlikely to derail the Kraft bid, which requires the support of half of Cadbury’s shareholders to succeed. He described Ms Rosenfeld as a “good operator”.
Kraft said that it thought the deal would transform its portfolio to achieve better long-term growth. Other Kraft shareholders were supportive. Nelson Peltz, the activist US investor who owns 3.5 per cent of Cadbury and sold a 2-3 per cent stake in Kraft after the deal was announced, said: “I don’t think Kraft overpaid given what was paid for Wrigley [by Mars] a year ago.” Credit ratings agency Fitch lowered its ratings on Cadbury and Kraft, but both remain investment-grade at BBB-.
In London, Gordon Brown came under pressure from the Liberal Democrats for failing to obstruct the Kraft deal. Nick Clegg, Lib Dem leader, said the prime minister should have stoppedRoyal Bank of Scotland, which is 70 per cent owned by UK taxpayers, from helping to fund Kraft’s bid for Cadbury. “Tens of thousands of British companies are crying out for that money to protect jobs.”
The prime minister and Lord Mandelson, business secretary, have resisted revising merger rules to make it harder for foreign groups to buy UK assets.