Kraft Foods’ largest shareholder, Berkshire Hathaway, has issued a public warning to the US food group over its use of new shares to fund the proposed acquisition of UK confectioner Cadbury.
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Berkshire said that it would vote against Kraft’s proposal to issue as many as 370m new Kraft shares to fund its bid for the Dairy Milk maker.
Despite Kraft management’s insistence that it is taking a “disciplined” approach to the acquisition, Berkshire said that the proposal would give Kraft a “blank cheque” to increase its offer price in the pursuit of Cadbury.
In a bid to woo Cadbury investors, Kraft this morning (5 January) revised its original approach and increased the cash component of the cash-and-stock offer.
“We worry very much that, indeed, there will be an additional change from the revision announced this morning,” Berkshire warned in a statement released later in the day.
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By GlobalDataBerkshire argued that Kraft stock is a “very expensive currency” to be used in an acquisition.
Berkshire, which holds 9.4% of Kraft’s outstanding stock, added that if it comes to believe that the final offer for Cadbury “does not destroy value for Kraft shareholders,” it could change its vote.
Kraft was not available for immediate comment.
