Berkshire sells 23% of its Kraft share
Berkshire sells 23% of its Kraft share
Berkshire sells 23% of its Kraft share
Warren Buffett's Berkshire Hathaway Inc. cut its stake in Kraft Foods Inc. in the first quarter as the billionaire investor raised cash for the biggest acquisition of his four-decade reign.
The Mr. Buffett-controlled firm exited positions in health-care companies UnitedHealth Group Inc. and WellPoint Inc., sold all holdings of SunTrust Banks Inc. and disposed of a small stake in insurer Travelers Cos., according to a filing with U.S. securities regulators Monday.
And Berkshire again reduced holdings in Johnson & Johnson, Procter & Gamble Co. and ConocoPhillips in the first quarter as Mr. Buffett's company completed the $27 billion purchase of railroad Burlington Northern Santa Fe.
But it was the sale of 23% of its stake in Kraft—the company he criticized for paying too much to buy Cadbury PLC—that stood out. Mr. Buffett took the rare step of publicly criticizing Kraft Chief Executive Irene Rosenfeld's pursuit of Cadbury this year, saying she overpaid by using undervalued Kraft shares to fund the deal. And he objected to the price Kraft got for the sale of its DiGiorno and Tombstone pizza brands to Nestle SA, which raised additional cash for the Cadbury transaction.
"Both deals were dumb," Mr. Buffett told Berkshire shareholders at the company's annual meeting this month, while saying that Ms. Rosenfeld was still a good manager. Ms. Rosenfeld has said Kraft increased value for shareholders by buying Cadbury, obtaining brands with global recognition and adding a valuable distribution network in developing countries.
Berkshire and Mr. Buffett, the company's 79-year-old chairman and chief executive, now own 106.7 million shares in Kraft, and appeared to remain the largest shareholder in the Northfield, Ill.-based company. Competing money managers were also filing updates on the stock holdings Monday, making an exact ranking difficult to calculate. Berkshire's remaining Kraft shares are worth more than $3.2 billion based on Kraft's closing price of $30.55
The filing shows Berkshire's holdings as of March 31, meaning Berkshire had already sold Kraft shares when Mr. Buffett most recently aired his objections at the shareholder meeting. He had also said in interviews before the completion of the £13.6 billion ($ 19.69 billion) Cadbury transaction that he still considered Kraft shares to be undervalued, while saying the use of Kraft stock to acquire Cadbury made him feel "poorer."
"He's been complaining about that Cadbury deal like a kindergartener who can't get over the fact that someone stole his bicycle," said Jeff Matthews, the founder of hedge fund Ram Partners LP. "He's held out the olive branch to their CEO and said that she's a smart lady, but he just keeps talking about it. It's pretty remarkable."
A Kraft spokesman said Mr. Buffett doesn't advise the company when he trades the shares, but noted that the reduction appeared to be part of an effort to raise money for the Burlington deal alongside the sale of stock in consumer-products firm Procter & Gamble and Johnson & Johnson, the world's largest maker of health-care products.
Omaha, Nebraska-based Berkshire cut its holdings of Procter & Gamble by about 10% to a stake that was worth $5 billion on Monday, and reduced Johnson & Johnson by 12% to a stake worth $1.53 billion. But Mr. Buffett had told shareholders a year ago—after he first sold those stocks—that they were companies he "would have preferred to keep," and was selling only because he had opportunities to put the money to work elsewhere.
The first time he sold them, Mr. Buffett put Berkshire money into preferred shares and warrants in Goldman Sachs Group Inc. and General Electric Co. This time, he had Burlington in his sights, which required Berkshire to sell $8 billion of debt and, like Kraft when it wanted Cadbury, issue new stock.
Mr. Buffett, in his annual letter to shareholders in February, wrote that the decision he made alongside Vice Chairman Charlie Munger to issue shares for the Burlington deal "was a close one," but worth it to buy "a business we understood and liked for the long term."
But, he wrote, "Charlie and I enjoy issuing Berkshire stock about as much as we relish prepping for a colonoscopy."
Berkshire cut holdings of ConocoPhillips for the sixth straight quarter, and exited from SunTrust, UnitedHealth and Wellpoint after cutting the stakes in prior periods. Mr. Buffett has confessed to the "mistake" of buying ConocoPhillips stock when oil prices were near their peak, and has written down the value of the company in prior quarters. Mr. Buffett's firm also sold shares in ratings agency Moody's Corp., used-car company CarMax Inc., M&T Bank Corp., newspaper chain Gannett Co. and Costco Wholesale Corp. Mr. Munger is on Costco's board of directors.
Berkshire added to holdings of medical devicemaker Becton Dickinson & Co., Iron Mountain Inc. and trash-hauler Republic Services Inc.
Berkshire's quarterly disclosure of its $51 billion U.S. portfolio is scrutinized by professional money managers and amateur investors alike. Mr. Buffett's company joins other investment firms that control more than $100 million in reporting stock holdings 45 days after the end of a given quarter, giving the public its freshest possible glimpse into the investing decisions of the "Oracle of Omaha." But Mr. Buffett has warned investors against assuming all moves in the Berkshire portfolio are his. Portions of the company's holdings are managed by Lou Simpson, the head of investing at Berkshire-owned car insurer Geico Corp.
Berkshire stakes in American Express Co., Coca-Cola Co. and Wells Fargo & Co. remained unchanged. Mr. Buffett's firm is the largest shareholder in each.
Most hedge-fund managers and others wait until the last possible moment to make these filings. Because the 45th day after March 31 fell on Saturday, the deadline for first-quarter holdings was Monday.
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