Kraft may not need Warren Buffett to nab Cadbury
Warren Buffett is often a go-to guy when companies want to raise money.
Yet while his Berkshire Hathaway Inc is Kraft Foods Inc’s largest shareholder, he may not be needed as an ace in the hole, as the food company attempts to buy British candy maker Cadbury Plc.
“Buffett could put some Berkshire resources behind a Kraft bid but I find it hard to believe it is necessary,” said Vahan Janjigian, whose book “Even Buffett Isn’t Perfect” was published last year. “Credit markets have thawed enough for Kraft to get financing in traditional ways if it needs it.”
Cadbury, which makes Dairy Milk chocolate, Halls cough drops and Trident gum, on Monday spurned Kraft’s unsolicited $16.7 billion cash-and-stock offer. Kraft products include cheese, Kool-Aid, Oreo cookies and Oscar Mayer meats.
Through his assistant Carrie Kizer, Buffett did not return requests for comment.
Buffett, the world’s second-richest person and probably its most revered investor, is familiar with candy.
Last year, his company funded $6.5 billion toward Mars Inc’s purchase of Wm. Wrigley & Co. It also owns See’s Candies, whose confections Buffett munches at the annual shareholder meetings of Omaha, Nebraska-based Berkshire.
Berkshire owned 138.3 million shares, or 9.4 percent, of Northfield, Illinois-based Kraft as of June 30 free credit reports.
Those shares were worth about $3.6 billion on Thursday. They also throw off $160 million of annual dividends.
“Kraft and Cadbury have what Buffett likes: strong brands that have been around a long time, and which have durable earnings power,” said Justin Fuller, an analyst at Midway Capital Research & Management in Chicago and author of the Buffettologist.com blog.
Yet buying Cadbury may not be cheap. Some analysts believe Hershey Co could make a long-shot offer, forcing Kraft Chief Executive Irene Rosenfeld to drive up her company’s bid.
“We would not rule out Kraft raising extra cash through a private investor,” analysts at JPMorgan Cazenove Ltd wrote this week, noting Berkshire’s role in the Mars-Wrigley transaction.
Kraft said it would not plan to issue more equity, even if it needed to raise billions of dollars to buy Cadbury.
And asked on Monday if Kraft expects Buffett’s help, Chief Financial Officer Timothy McLevish parried the question, saying: “We have strong banking relationships and good access to debt capital markets and feel quite confident that we will not have difficulty with financing.”
THE “BUFFETT BLESSING”