Kraft Cadbury bid takes blow

Posted on 5 Jan 2010 by The Manufacturer

A major shareholder in US food conglomerate Kraft has vetoed a move by the company to issue 370 million additional shares in a bid to raise money to buy UK based chocolate maker Cadbury.

Berkshire Hathaway – the US investment firm fronted by billionaire business mogul Warren Buffet – owns 9.4 per cent of the shares in Kraft, which it says makes it the biggest shareholder.

A meeting has been arranged for Friday during which all shareholders will vote on the share issue but Berkshire released a statement today saying it was voting against the proposal.

Buffet is renowned for his shrewd and prudent business demeanour and the statement released by his company today was in this vein.

Read the statement: “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. And we worry very much that, indeed, there will be an additional change from the revision announced this morning.

“To state the matter simply, a shareholder voting “yes” today is authorizing a huge transaction without knowing its cost or the means of payment.”

Berkshire said Kraft’s current low stock value of $27
makes it “a very expensive “currency” to be used in an acquisition.”

It quoted the date of January 19 as the deadline by which Kraft must announce its final bid for Cadbury and said it will change its vote then only “if we conclude at that point that the offer does not destroy value for Kraft shareholders.”

Earlier today Kraft’s Swiss counterpart Nestle announced it would not be making a bid for Cadbury after it (Nestle) bought the US firm’s North American frozen pizza business in a £2.3bn deal.

Another party interested in buying Cadbury is US chocolate maker Hershey who could make a bid singly or who could team up with Italian confectioner Ferrero for its takeover approach.

Kraft’s initial £9.8bn bid for the Birmingham based Crème Egg make was dismissed as “derisory” in December.