Buffett steps in on Kraft bid

NEW YORK - Warren Buffett, the billionaire investor who helped scuttle Coca-Cola's bid for Quaker Oats 10 years ago, is restraining Kraft Foods in its quest to acquire Cadbury.

Buffett's Berkshire Hathaway, Kraft's biggest shareholder, urged fellow investors to oppose a plan to issue as many as 370 million shares to help buy the UK-based firm.

Kraft chief executive Irene Rosenfeld is seeking a "blank check" for the deal, Berkshire said.

"I think Buffett's got it nailed," said Donald Yacktman, founder of Yacktman Asset Management. "Kraft is hemmed in - there's only so much they're going to be able to do to make this acquisition."

Buffett, who has said shareholders must act like owners, urged caution in negotiations after Cadbury rejected Kraft's bid of £10.6 billion ($23.07 billion).

In publicly asking others to join him, the 79-year-old Berkshire chairman is drawing on his power as a 9.4 per cent owner of Kraft and his standing in financial markets as the world's pre-eminent investor.

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's assistant, Carrie Kizer, said the company had no comment.

"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 buffettologist.com.

Buffett was the most vocal dissenter on Coca-Cola's board when directors met in 2000 to discuss a US$15.3 billion ($20.8 billion) bid for Quaker Oats.

Buffett argued the price was too high because a stock swap proposed as part of the deal would give up more than 10 per cent of Atlanta-based Coca-Cola.

The board voted against the acquisition, and PepsiCo bought Quaker Oats in August 2001 for US$14 billion. Berkshire remains the largest shareholder in Coca-Cola. Buffett's company also holds the biggest stakes in American Express and Wells Fargo.

- BLOOMBERG