Buffett Says Kraft Made `Two Dumb Deals' With Cadbury Purchase, Pizza Sale

Billionaire Warren Buffett, whose Berkshire Hathaway Inc. has an 8 percent stake in Kraft Foods Inc., said the maker of Oreo cookies and Cheez Whiz blundered in the takeover of Cadbury Plc and the sale of its pizza brands.

“Both deals were dumb,” Buffett told investors today in Omaha, Nebraska, where Berkshire is holding its annual shareholders’ meeting. “The pizza deal was particularly dumb.”

Kraft in March acquired Uxbridge, England-based Cadbury for about 13.6 billion pounds ($20.8 billion) in cash and stock after a five-month pricing dispute. The deal transformed the Northfield, Illinois-based company into the world’s biggest confectioner, and Kraft said the acquisition would give it leading positions in emerging markets.

Kraft Chief Executive Officer Irene Rosenfeld pursued Cadbury to gain control of its sales network in places such as India and Latin America. The deal, which married Kraft’s Oreo cookies with Cadbury’s Dairy Milk chocolate, was partially funded by the sale of Kraft’s DiGiorno and Tombstone pizza brands to Nestle SA.

“I just hated to see them give up a significant portion of those businesses to buy Cadbury” at the price of the sale, Buffett said today. He had previously called the acquisition “a bad deal” based on Kraft’s share price at the time.

‘Dumb Things’

Buffett, who considered the pizza deal to be worth $2.7 billion because of tax considerations, has said that giving up a business that makes $280 million a year for that amount was “a mistake.”

“We expect to do some dumb things, but we get mad when other people do dumb things,” Buffett said today. He called Rosenfeld a “perfectly capable” manager.

Kraft spokesman Michael Mitchell said the deal “accelerates shareholder value” and that selling the pizza businesses was the right decision after fielding a “strong” offer from Nestle.

“While we respect Mr. Buffett as an investor, we strongly believe that the Cadbury acquisition and the sale of our pizza business were absolutely the right decisions for the company,” Mitchell said in an e-mailed statement.

To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net; Jamie McGee in New York at jmcgee8@bloomberg.net.

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