Worldwide food shortage is coming_Biggest investors want food companies_Buffett Uses Clout ‘Blank Check’ for Cadbury Offer

Buffett Uses Clout to Cancel ‘Blank Check’ for Cadbury Offer

Warren Buffett, who worked behind the scenes to undermine Coca-Cola Co.’s bid for Quaker Oats 10 years ago, has gone public to rein in Kraft Foods Inc.’s Irene Rosenfeld in her quest to acquire Cadbury Plc.

Buffett’s Berkshire Hathaway Inc., Kraft’s biggest shareholder, said today that Rosenfeld was seeking a “blank check” and urged fellow investors to oppose her plan to authorize the issuance as many as 370 million shares. Northfield, Illinois-based Kraft, which has bid 10.6 billion pounds ($17 billion) for Cadbury, first announced its intention in September to buy the company.

“It’s unusual for Berkshire to put out any sort of comment like this publicly,” said Glenn Tongue, a partner at T2 Partners LLC, which holds investments in Omaha, Nebraska-based Berkshire and Kraft and doesn’t want the foodmaker to increase its bid. “As a shareholder I love seeing this because at the current offer this deal makes plenty of sense.”

Buffett, who has said shareholders need to act like owners, is calling for caution in negotiations after Cadbury said Kraft’s offer was insufficient. In publicly urging investors to join him, the 79-year-old Berkshire chairman is drawing on his power as a 9.4-percent owner of Kraft and the standing he’s gained in financial markets as the world’s preeminent investor.

“If he says no, everybody else is going to pile on and say no too,” said Justin Fuller, a partner at Midway Capital Research & Management who runs the buffettologist.com Web site.

Berkshire said it may support a Cadbury takeover if it concludes this month that the final offer “does not destroy value for Kraft shareholders.” Buffett didn’t immediately respond to a request for comment on what terms he would endorse.



‘Expensive Proposition’



“I don’t think that he’s opposed to the acquisition, I think he’s opposed to the use of stock,” said Gerald Martin, a finance professor at American University’s Kogod School of Business in Washington. “He feels that the shares are so undervalued that it would be an expensive proposition.”

Buffett won a global following as the “Oracle of Omaha” by profiting from investments in out-of-favor stocks and businesses. Berkshire, the biggest shareholder in Coca-Cola, American Express Co. and Wells Fargo & Co., used profits last year to buy stock in some of the world’s biggest companies, including Exxon Mobil Corp. and Kraft rival Nestle SA.

Buffett was the most vocal dissenter on Atlanta-based Coca- Cola’s board when directors met in 2000 to discuss a $15.3 billion bid by then-Chief Executive Officer Douglas Daft for Quaker Oats, the maker of Gatorade, Cap’n Crunch cereal and Rice-A-Roni. Buffett argued the price was too high because a stock swap proposed as part of the deal would give up more than 10 percent of Coca-Cola, board member James Williams said in a 2004 interview.



‘Very Scarce’



The board voted against the acquisition and PepsiCo Inc. bought Quaker Oats instead, completing the purchase in August 2001 for $14 billion.

“I’m not surprised that Berkshire would resist issuing shares,” said Tom Russo, partner at Gardner Russo & Gardner, which holds Berkshire, Cadbury and Vevey, Switzerland-based Nestle. Buffett “has had the longstanding belief that equity capital is very scarce.”

Rosenfeld, CEO at Kraft since 2006, is seeking to buy the U.K.-based maker of Creme Eggs and Trident gum to expand its business outside the U.S. Kraft raised the cash portion of the Cadbury bid today after agreeing to sell pizza brands including DiGiorno and Tombstone to Nestle, the world’s largest food company.

Cadbury fell 3.2 percent to 779 pence in London, the biggest drop in eight months. Kraft added 91 cents, or 3.3 percent, to $28.34 at 3:11 p.m. in New York Stock Exchange composite trading. That values Berkshire’s stake at more than $3.9 billion.



‘Very Expensive Currency’



Buffett said Kraft shares were “very expensive ‘currency’” after falling about 17 percent in the two years ended last week, and he criticized management for seeking to issue stock at current prices after repurchasing shares at $33 in 2007. Kraft executives “have to do a lot of things right to justify this price,” Buffett said in a September interview on CNBC.

“We agree that Kraft Foods shares are deeply undervalued,” the foodmaker said in a statement. “We intend to remain disciplined in this process.”