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Warren Buffett - Retracing the Kraft-Mondelez Split

March 19, 2013 | About:
Sally Jones

Sally Jones

49 followers
Amid a sharp decline in revenue and the after-shock of dividing the company, spinning off a new global snacks unit Mondelez International Inc. (MDLZ) in October 2012, Kraft Foods Group (KRFT) reported last month that its fourth-quarter earnings were down 72%. In 2011 the company’s largest investor Guru Warren Buffett was against this split that meant the Kraft company would separate 95,000 trademarks and divide billion-dollar brands of chocolate, cookies and other foods and beverages. At that time, Buffett said in a CNBC interview: “Whenever a company makes a deal, I go to the store and I buy a congratulations card and I buy a sympathy card. And then five years later I decide which one to send.” On Dec. 31, 2012, Buffett reduced his KRFT position by 94.52%.

In the planning stages of the spin-off, Kraft management felt the spin-off would offer investors the best of both worlds. According to a GuruFocus feature at that time, “Kraft can now take advantage of Cadbury’s excellent marketing and distribution networks in emerging markets like India, China and Brazil to help propel the growth of new products it plans to launch in these economies. Already, emerging markets are a significant growth driver for Kraft, and the company feels that the growth of the Global Snacks Division is somewhat nullified by the stagnant nature of the North American Grocery Division. Thus spinning them off will help it realize high value for both the companies to provide higher returns to its shareholders.”

However, following the October 2012 division of Kraft Foods into two businesses, a North American grocery company and a global snacks company, Investor Gurus joined Warren Buffet and began unloading KRFT. In the quarter ended Dec. 31, 2012, Gurus Daniel Loeb and Louis Moore Bacon sold out their KRFT shares. Joel Greenblatt reduced his KRFT by 82.74%, and other Gurus including Mario Gabelli, Jeff Auxier, Manning & Napier Advisors, Hotchkis & Wiley, Jean-Marie Eveillard and Steve Cohen also reduced their shares by 64% to 73%.

Prior to that, in summer 2012 MDLZ trading was mixed for investors. In the quarter ending June 30, 2012, Buffett reduced his MDLZ position by 24.6%, leaving him with 58,826,390 shares.

Buffett’s MDLZ holding history:



Other Gurus sold out their MDLZ the same day, including Bill Ackman, Steven Romick, First Pacific Advisors, Chris Davis and Tweedy Browne. Meanwhile adds were made by Paul Tudor Jones for 58.49%, Pioneer Investments for 29.65% and Jim Simons for 79.56%.

Here is in-depth information on Guru trades of MDLZ.

More Kraft in the news: Earlier this month, Kraft Foods Group Inc.’s board of directors declared a regular quarterly dividend of $0.50 per share of common stock. This dividend is payable on April 12, 2013 to shareholders of record as of March 29, 2013.

Finally, the packaged-food maker Kraft Foods Group Inc. joined the Nasdaq 100 index today.

About the author:

Sally Jones
Sally Jones writes about Real Time Picks. She says, "I truly enjoy watching the Gurus in realtime and telling their story."

Rating: 3.2/5 (5 votes)

Comments

Valu2day
Valu2day premium member - 1 year ago
I'm not sure I understand the point of this article. Does it just merely suggest that Mr. Buffett and a few other prominent investors were correct in selling or reducing their stakes in MDLZ and KRFT? Mr. Buffett didn't give his blessings to the Cadbury deal. He started to reduce his stake back then. I believe he sold 9%. So, in essence he was displeased long before the company decided to split. I think we can guess which greeting card he may of bought then.
Charteroak_2000
Charteroak_2000 premium member - 1 year ago


MLDZ has a really low ROE .... KRFT is really just a cash cow now...
ekosmetatou
Ekosmetatou premium member - 1 year ago
But Buffett recently bought more MDLZ!

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