Billionaire Warren Buffett’s Berkshire Hathaway says it voted against food maker Kraft proposal to issue 370 million shares to finance its bid for British candy maker Cadbury

–(– 01/05/2010 – Commodities industry news provided by Financial News USA. Billionaire Warren Buffett’s Berkshire Hathaway says it voted against food maker Kraft proposal to issue 370 million shares to finance its bid for British candy maker Cadbury.

Kraft [KFT 27.43 — UNCH (0) ] has offered $16.5 billion in cash and stock for Cadbury, which has rejected the offer.

Berkshire Hathaway owns about 138.3 million, or 9.4 percent, of Kraft’s shares. It says it is Kraft’s largest shareholder.

Kraft on Tuesday increased cash part its $16.5 billion offer for Cadbury after agreeing to sell its North American pizza business to Nestle.

Kraft has until Jan. 19 to revise its offer. Berkshire says it will vote to issue shares only if it does not think the final offer hurts value for Kraft shareholders.

Kraft’s revised 10.2 billion pound ($16.4 billion) proposal adds 60 pence cash per share to the offer to tempt shareholders in the British maker of Dairy Milk chocolate and Trident gum, but reduces the stock portion of the hostile offer accordingly.

The extra cash brings the cash portion to 360 pence and is funded from a deal whereby Switzerland’s Nestle will buy Kraft’s North American frozen pizza business for $3.7 billion.

Cadbury renewed its rejection of the Kraft takeover bid, once again calling it “derisory.” Cadbury shares fell after Nestle, the world’s biggest food group, said it did “not intend to make, or participate in, a formal offer” for the British confectioner.

They fell as low of 786 pence before trading off 1.9 percent at 790 pence by 1230 GMT compared to Kraft’s cash and share bid which valued Cadbury shares at 743 pence on Tuesday.

“Nestle’s decision effectively leaves Kraft as the overwhelming front-runner….Nestle’s decision effectively removes Ferrero and Hershey from the field as competitive forces,” said analyst Jeremy Batstone-Carr at Charles Stanley.

U.S.-based Hershey and Italy’s Ferrero expressed interest in bidding for Cadbury in November but they need to come up with fully financed bids by Jan. 23 to succeed under British takeover rules.

Analysts had expected Nestle might team up with Hershey, while Ferrero was seen as needing financial help. Analyst Martin Deboo at Investec Securities said Kraft had effectively bought Nestle’s silence in the bid process while the likelihood of a competitive auction for Cadbury had fallen.

“We viewed Nestle as holding the key to any competitive auction in that their participation would have liberated an otherwise financing and ambition-constrained Hershey and/or Ferrero to make a run,” he said.

Many analysts and investors expect Kraft will need to pay 800 pence per share or above to win over Cadbury, and Deboo sees Kraft’s ultimate valuation of Cadbury at 820 pence. About Financial News USA

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