Buffett Watch

Kraft CEO Heeds Warren Buffett's 'Animal Spirits' Warning on CNBC

Kraft Foods CEO Irene Rosenfeld

Kraft CEO Irene Rosenfeld has promised employees she won't let "animal spirits" take over as the company pursues its proposed acquisition of Cadbury.

That's the phrase Warren Buffett used in a CNBC interview last week as he said Kraft's $16.4 billion stock offer is a "full price."  That's seen as a signal Buffett does not want Kraft to raise its offer, despite Cadbury's rejection of the bid as too low.

In a transcript of a Kraft Global Employee Town Hall held yesterday, and filed today with the SEC, Rosenfeld says the combination of Kraft and Cadbury would create a "formidable global powerhouse in snacks, confectionery and quick meals."

But, she adds, "This is something we would like to do, not something that we have to do. And so we intend to remain disciplined in our actions. And I can assure you we will avoid allowing those animal instincts that Warren Buffett alluded to take over."

In last week's CNBC interview, (complete transcript and video here), Becky Quick asks Buffett if he thinks Kraft's bid for Cadbury is a "good one?"

BUFFETT: Well, it's a pretty full one. I mean-- the-- Kraft-- Kraft has got-- anytime you're in a takeover, you know, that-- the animal spirits run high and all of that. But Kraft has the disadvantage of using an undervalued stock. So if you-- if part of your currency is a stock that's worth more money than it's selling for and you're-- you're paying full negotiated value for the other guy’s property and you wouldn't sell your own property for anything like the market price, it's-- it's a-- it makes it a tough game. So it's-- it's a full price.

BECKY: Are-- that makes it sound like as if you're not in favor of this bid?

BUFFETT: No, I-- I've got a lot of confidence in (Kraft CEO) Irene Rosenfeld. She'll-- but they have to do a lot of things right to justify this price.

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