Warren Buffett may have just had his worst year for a decade, but as Kraft's biggest shareholder (with a near-10% stake), he still has a big say in the fate of Cadbury. So the legendary investor's latest contribution to proceedings has raised a few eyebrows: after Kraft raised the cash component of its bid yesterday, Buffett released a strongly-worded statement insisting the company should not get 'a blank cheque allowing it to change its offer for Cadbury in any way it wishes'. Since he presumably could have made the same point to Kraft CEO Irene Rosenfeld over the phone, it's hard to escape the conclusion that there's more to this than meets the eye...
Buffett said that his Berkshire Hathaway vehicle (which has just delivered its worst performance relative to the stock market since 1999) would vote against Kraft's plan to issue 380m new shares to pay for the deal, at least while the stock price is as low as it currently is. He also said he was worried about Kraft hiking its offer again before the January 19 deadline, which rather suggests that if Rosenfeld did come up with a knockout bid, he'd probably vote against that too. Although he did leave himself some wiggle room, by reserving the right to change his mind once he sees the details.
Buffett has already publicly warned Kraft against over-paying, so it's hard to believe this was the only reason for his intervention. Equally it's three weeks until he and his fellow shareholders have to vote on any offer, so the timing seems a bit odd. Unless we link it to yesterday's developments, that is; the Guardian's Nils Pratley reckons he's taking advantage of what happened (notably Nestle ruling itself out) to push down the expectations of Cadbury's investors still further, while at the same time giving the Kraft share price a timely boost.
If so, it seems to have had the desired effect: Cadbury's share price closed at 779p yesterday, while thanks to the rise in Kraft's stock its offer is now worth about 757p. That's the smallest gap thus far, which lends weight to Kraft's claim that its bid is reasonably priced.
On the other hand Cadbury seems distinctly unimpressed with Kraft's revised offer. And since Buffett seems to oppose Kraft paying more, a deal is looking less and less likely.
In today's bulletin:
Rose back in the pink as M&S enjoys solid Christmas
Buffett batters Kraft's Cadbury offer
You can't a-fjord not to pay, Britain tells Iceland
Snowy weather piles on the winter blues
A Traveller's Tale: Looking back on the world in 2009