George S. May Business Blog

Warren Buffett votes “no” on Cadbury take over — Cadbury shares plummet

Warren Buffett recently voted no against Kraft’s potential takeover bid for Cadbury. Buffett is by far one of the most influential Kraft shareholders, so obviously his votes/moves/decisions are always heavily scrutinized; this time people are speculating that his “no” is actually more of a move to drive down Cadbury’s price.

Telegraph: As befitting the Sage of Omaha, Berkshire Hathaway’s statement is canny indeed. First, it uses tough language in voting against Kraft’s proposal to issue 370m shares to facilitate the Cadbury bid. To vote yes, it argues, would be to give Kraft management a blank cheque in a bid process where they can still change the terms.

This is undoubtedly true and gives the impression that Kraft’s biggest shareholder is queasy about the deal, helping Kraft’s shares go up on the view that its chances of winning Cadbury have diminished while Cadbury’s shares go down as expectations of a bid premium also falter. But this is exactly what Rosenfeld wants over the next few weeks, and it’s what Buffett wants too. The value of Kraft’s currency goes up while Cadbury’s falls, helping the Kraft board structure a deal that eventually minimises the use of shares and maximises cash. Buffett’s and Rosenfeld’s interests are entirely aligned – he is, after all, the company’s biggest shareholder and he’s never questioned the industrial logic of the Cadbury approach.

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