Buffett Orchestrates Kraft-Cadbury Deal

This is more interesting than it may appear. You take a guy who has a long reputation for honesty and fair dealings, and you pit him against his biographer who, unlike the rest of us, enjoys a more textured understanding of the man. It's interesting.

I would, in a probabilistic way, go with the long reputation. That's not to say the biographer isn't honest and right, just that I'd put my money on Buffett.

As for the Kraft deal: Nothing that Buffett has said seems off the wall. As if he were being motivated by some deeper psychological forces of the heads I win tails you lose variety versus business common sense.

He put up a press release saying Berkshire, the largest shareholder of Kraft, would oppose the deal if in his mind they were overpaying however derived (too much undervalued stock, too much cash, or some other variation). We are lead to understand that Buffett has spoken with management in private but didn't see eye to eye. Berkshires is not a majority shareholder so he, Buffett, has to convince other shareholders to side with him if it progresses to a point he disagrees with.

Kraft tweaks some things. Goes off and sells a perfectly fine business for 3 and something billion that will only net 2 and something billion after taxes but was earning just under 300 million thereby giving it up at about 9 times earnings. All this to put the proceeds towards buying another perfectly fine business at 17 times earnings. In addition, it gives up undervalued stock and more cash. Not the end of the world, but not necessarily the most sensible thing to do especially given that there was no credible bidder outside of Kraft. Not near the same magnitude, but reminiscent of the BofA Merrill deal and the initial but failed Microsoft Yahoo deal. Nobody else is bidding. Why compete against yourself.

To some it up, the biographer wants us to believe that something else is going on here than basic business motivations. She knows more than we do what makes Warren tick, and maybe that's why she's doing what she's doing. He doesn't appear to be taking her calls, but she knows how to push his buttons.

You decide. History tells us that Buffett is supremely logical when a decission involves lots of money, but this time we must suspend that knowledge to instead believe he is bat shit crazy and is out in the wild operating off of personal insecurities. Maybe, but not likely.

Erin

Are you commentors insane?

Bitter you say? What is this talk of bitter? Is this some campaign to discredit one of the few knowledgeable people on matters WEB (another being Jeff Matthews at "we're not making this up"). Alice is not bitter. She is OBJECTIVE. She has the distance -- and the knowledge in areas of great importance to BRK such as insurance -- that only an independent biographer can have. And I speak from experience, having written an "authorized" (=not independent) biography of another living person, albeit someone not so famous as WEB. Mine is a puff piece; hers is a genuine contribution to business literature. And a fearless willingness to unmask WEB for who he really is (which also includes much that is good).

Let me state it clearly: You guys are blind. Focus on the uniqueness of her insight, not on some vague assumed psychological motives for why she might be critical of the reasons underlying WEB's publicly criticizing Irene vs. privately criticizing her .

In coming to Alice's defense, I care not a jot to endear myself to anyone, not Alice, not you commentors, not WEB, not a soul. But this is ridiculous to call her bitter. You miss the larger insight into the reality of the man as displayed in his calculated approach to the KFT deal. He figured out his own win-win. Nobody but Alice could have figured that out. OK you clowns, I'm done. Go ahead and launch the counterattack. It will just signal that you are shilling for WEB.

I remain truly suspicious of who put this group of commentors up to this. At first, when you said bitter I thought, who are you talking about? Irene at KFT? OMG, you're referring to Alice?
WRONG. Fearless is the word that comes to mind. You commentors need to open up your eyes and realize that WEB is far, far more clever at reputation management than you could possibly imagine. Alice is unmasking the man as merely human. We could get such insights from no other source. It's as if the veil has been lifted for her, but not yet for you. I like the money WEB has made me, but I see the truth and originality of her remarks. I do not see bitterness. I take strong exception to your focus on some vague emotion rather than on the content of what she has said here.

And, as Forrest Gump said, that's all I have to say about that.

bitter, very bitter. Cannot be trusted in much the same way she argues that owning the stock would bias her. She has lost a friend, and she is bitter.

Alice - you are really sounding bitter all the time now. It makes you look biased.

Focus on reporting because we can all tell you are really hurt by this whole thing.

Get over it - you did your job and you are an ok person. Stop crying in public, it is not becoming...

Good luck,

a friend.