June 26 ,2014 | by Hari Srinivasan
Business magnate Warren Buffett ‘not buying Coca-Cola’
A brief flurry of concern emerged when rumours suggested that Warren Buffett could buy out Coca-Cola, but he claims not to be interested.
Warren Buffett has an established reputation as a major investor, and he isn’t new to going after large targets. But when Coca-Cola shareholder David Winters said last week that he was concerned Mr Buffett would mount a takeover bid for the giant company, more than a few eyebrows were raised among analysts.
The rumours emerged last week when Mr Winters told Fox Business Network that he suspected Mr Buffett, whose investment company Berkshire Hathaway owns nine per cent of the drinks giant, and 3G Capital might work together to take Coca-Cola private. He added that he had written a letter to the board warning them off such a move, reminding them that they have a “duty to all shareholders”.
Many commentators have dismissed the claims out of hand, and Mr Buffett himself has recently done the same,telling CNBC that there is “absolutely no chance of that”.
That doesn’t necessarily mean there was no reason to suspect such a deal might be in the works. After Mr Buffett joined forces with Brazil’s richest man Jorge Lemann, who runs 3G Capital, to acquire Heinz for $23 billion, the companies said they had developed a template that could be used for future deals. Mr Lemann’s reputation grew after he took Burger King private in 2010.
But the simple fact is that Coke is now such a huge company that any deal was cost almost ten times as much as the Heinz deal.
Coca Colas market value is currently around $180 billion, and any buyer would be likely to pay a premium for the privilege of acquiring the firm.
The number of shareholders involved suggests that it would be hard to find a deal that was acceptable even if it was possible to do a deal so large.
Coke is likely to remain in public hands for some time to come, but it seems that some investors were interested in the idea of private ownership – shares in the company rose after Winters’ interview with Fox, but those losses were eroded when Mr Buffett refuted the idea of a buyout. It may not be possible, at the moment, but that does not mean a way will never be found.
Hari is the LSBF Blog's News Editor. He manages the editorial content on the blog and writes about current affairs, SME, entrepreneurship, energy, education and emerging market news.
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