Warren Buffett takes on Kraft
The billionaire investor comes out swinging against Kraft's proposal to issue shares to pay for Cadbury.
In a rare public smackdown, Buffett came down hard Tuesday against Kraft's latest move to buy chocolate maker Cadbury.
Kraft is mounting a hostile $17 billion bid for Cadbury, and wants to issue up to 370 million shares to help pay for the deal. That could raise around $10 billion.
But sometimes, a "no" vote just isn't enough. Sometimes you need to go guns a'blazin' with an "oh, snap!" public statement. And that's what Buffett did.
The share issuance "will give Kraft a blank check allowing it to change its offer to Cadbury -- in any way it wishes," Berkshire said in a statement. Those are Berkshire's italics, not mine.
"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 added.
At $27 a piece, Kraft shares are undervalued and should not be used to fund a major acquisition, Berkshire said. Berkshire cautioned all Kraft shareholders to consider one point: The value of what is being given in a deal is just as important as the value of what is being received.
"At this time, however, we believe no shareholder should vote 'yes' when he can't possibly know what he is voting for," the statement said.
But Buffett did throw in an olive branch. Kraft has until Jan. 19 to come up with a final bid for Cadbury. Berkshire said it would change its vote to "yes" if Kraft figures out an offer that doesn't destroy value for its shareholders.
The Wall Street Journal calls Berkshire's statement "a red-faced, four-alarm flag" for Kraft and its chief executive. And really, it's just one more piece of drama in a hostile bid that emphasizes the "hostile."
Cadbury has fought the acquisition tooth and nail, calling the offer "wholly inadequate" and a "blatant and opportunistic attempt to acquire the right business at the wrong price."
So what's Kraft to do now? One thing's for sure: Chief executive Irene Rosenfeld had better get Buffett on the phone and keep him there. Buffett can single-handedly torpedo this whole thing.
MORE ON MSN MONEY
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
The Dow is off slightly on the day, after falling nearly 130 points at the open. Decent reports on jobless claims and new-home sales helped.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.