I concurr with buffet on the KFT/Cadbury deal.

Discussion in 'Stocks' started by noob_trad3r, Jan 5, 2010.

  1. I think it is a misuse of shareholder equity and dilutive to shareholders.
  2. I am sure Buffett can rest-easy now.
  3. I actually don't like the acquisition plan at all.

    To my understanding, the acquisition does not generate synergy to both firm. The planned acquisition is just a value investing idea.

    Kraft needs to buy Cadbury because Kraft has a North American specific product lines, which is not too favorable for expanding to global developing markets.

    Kraft is also a very conservative company and it is afraid to develop it's own products. I think it want to stick to cheese, salad dressing, cookies, coffee, and macaroni dinner. They are afraid to further develop and expand it's Toblerone brand.

    Cadbury on the other hand doesn't need Kraft. They sell mainly chocolate and are ready for the global market expansion. The board of directors at Cadbury know the company is in a good position and they are not going to sell the company at or below it's intrinsic value.

    Whoever gets Cadbury, either Kraft or Nestle is likely going to overpaid for the acquisition.

  4. BTW: given the reaction of Buffett on Kraft's management's financing proposal, and on how Buffett pay close attention to management when it comes to investment decision, we will most likely see either Kraft having new management or Buffet slowly cutting its loss on this trade.
  5. i just hope they keep the new grilled chicken