Warren Buffett warns Kraft not to overbid for Cadbury

The Oracle of Omaha has warned Kraft not to overbid for Cadbury, since according to him, the American food giant's bid of $16.7 billion is a ''pretty full price.''

Kraft Foods, the largest food and beverage company in the US and the second largest in the world after Nestlé, said on 7 August that the UK confectioner Cadbury had rejected its $16.7-billion (£10.2 billion) acquisition offer to create ''a global powerhouse in snacks, confectionery and quick meals.'' (See: Cadbury rejects Kraft Foods' $16.7 billion merger offer)

Roger Carr, who chairs the world's second- biggest confectionery company, followed it up by writing a letter to Kraft chief executive officer, Irene Rosenfeld on 12 September by saying, ''Kraft's low-growth, conglomerate business model was unappealing as it differs from Cadbury's strategy of being a pure play confectionery company.'' (See: Kraft's low growth business model unappealing: Cadbury)

Warren Buffett, the biggest investor in Kraft, holding 10 per cent stock, said that Kraft has already offered a ''pretty full price'' for the London-based confectionery company.

He was doubtful whether Kraft shareholders would support a bid significantly higher than the $16.7-billion already offered by the company.

Speaking on CNBC yesterday, Buffett said, ''Kraft has the disadvantage of using an undervalued stock. ''If part of your currency is stock that's worth more money than it's selling for, then ''it makes it a tough game.''