Buffet is right about KFT but for the wrong reason
Finally, Buffett made the right thing today by voting against the deal to buy Cadbury. Even better, he expressed his doubts about management by saying he wouldn't give it (i.e. the management) "a blank cheque to change its offer “in any way it wishes”". That's good news.
One thing I don't like is Buffett's reason for opposing the deal. It's not like Kraft stock is "an expensive form of bid currency", as Buffett suggested. Certainly Kraft is not dramatically undervalued at $28 a share, or at least it's not dramatically undervalued as compared to BRK-A whose stock Mr. Buffett has recently used as bid currency to acquire a railroad. The good reason to oppose the deal would be the fact that Kraft is overpaying for Cadbury. Another good reason would be that the timing is also particularly bad: it is very stupid to buy a foreign asset at a time when the dollar is that low. The third reason to vote against it is that Kraft's way of approaching Cadbury was even more foolish than its acquisition strategy was in the first place: indicate an extreme interest in the deal, offer increasingly higher bids, and conduct all negotiations in public to give their counterparty a hint that closing the deal has become a matter of saving face for Kraft's CEO.
Instead of complaining about the dilution, Mr. Buffett should call a spade a spade and say that this is a stupid deal that should be called off. Even better, he should use his voting power to force the CEO out and replace her with someone who will forget about overseas expansion and stick to his direct responsibilities, which is to sell cheese and crackers in American supermarkets and use the cash flow to repair Kraft's balance sheet, which as of this writing shows a negative equity of -$16.8 billion.