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Coke Investor Warns Against ‘Sweetheart’ Deal With Buffett

Wintergreen Advisers CEO David Winters
Coca-Cola Co. shareholder David Winters said in a letter to Coca-Cola’s board that he’s worried Warren Buffett’s Berkshire Hathaway Inc. may be planning a “sweetheart” deal, enriching him and his friends in management. Photographer: Daniel Acker/Bloomberg

Coca-Cola Co. shareholder David Winters, who raised a ruckus over the company’s incentive pay plan in April, is getting back in the fray -- this time accusing Warren Buffett of plotting to take the soft-drink maker private.

The money manager said in a letter to Coca-Cola’s board that he’s worried Buffett’s Berkshire Hathaway Inc. may be planning a “sweetheart” deal, enriching him and his friends in management. Buffett, the beverage company’s largest shareholder, responded on CNBC by saying there was no chance of that happening. Coca-Cola has a market value of almost $180 billion.

Winters based his allegations on media reports, which suggest Buffett is considering a buyout of Coca-Cola with private-equity firm 3G Capital, using their takeover of H.J. Heinz Co. as a model, according to the letter. That would potentially lead to a sale with no competing offers, he said.

“We are concerned that a similar type of sweetheart, insider deal for Coca-Cola could, in our opinion, significantly undervalue Coca-Cola and irreparably harm Coca-Cola shareholders,” said Winters, chief executive officer of Wintergreen Advisers LLC.

The latest dispute follows a campaign by Winters against Coca-Cola’s stock compensation, which he deemed to be excessive and dilutive to shareholders. He had urged Buffett, CEO of Omaha, Nebraska-based Berkshire, to oppose the pay program. While Buffett abstained from voting against the compensation proposal at Coca-Cola’s shareholder meeting in April, he began criticizing the plan after it passed.

Stock Reaction

After Winters discussed the idea of a Buffett buyout this morning on the Fox Business network, shares of Coke climbed as much as 1.3 percent. Following Buffett’s rebuttal of the idea, the stock pared its gains. The shares were up 0.6 percent to $40.92 at the close in New York.

In a separate interview with Bloomberg News today, Winters said that a Coca-Cola buyout is “possible” even if the chance of a takeover is low.

Winters, who is based in Mountain Lakes, New Jersey, is an investor in both Coke and Berkshire. Despite the criticism, he said he’s a fan of Buffett and believes in some of his investment concepts. Winters is less impressed with Coke CEO Muhtar Kent, saying he’s paid excessively despite recent underperformance.

Answers Sought

“They have refused to answer, ‘What’s Coke’s future?’ and ‘How are they going to deliver for shareholders?’” Winters, 52, said in the interview. “They have done everything they can to ignore their primary fiduciary duty, which is to shareholders. That’s of great concern.”

Ben Deutsch, a spokesman for Atlanta-based Coca-Cola, declined to comment. Buffett didn’t immediately respond to a request for comment sent to an assistant.

At Berkshire’s annual meeting in May, Buffett said having a private conversation with Kent was better than publicly rebuking him over the company’s compensation plan.

“We made a very clear statement about the excessiveness of the plan and, at the same time, we in no way went to war with Coca-Cola,” Buffett, 83, said during the May 3 meeting in Omaha. “I don’t think going to war is a very good idea in most situations.”

Coca-Cola declined at the time to confirm discussions with Buffett or other shareholders about the equity plan.

“The company routinely interacts with shareowners both large and small in order to receive feedback on any number of matters, including about the 2014 equity plan,” it said. “We do not, however, share specific details of those interactions.”

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