Hedge fund manager David Winters is concerned the compensation plan Coca-Cola awarded itself – against Winter’s urging – might trigger a change-of-control provision that could result in immediate vesting to Coke's top management and board if a buyout occurs.
Coke, Berkshire, 3G haven't commented on the accuracy of media reports
“None of The Coca-Cola Company (NYSE:KO), Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) or 3G has publicly commented on the accuracy of these media reports. However, the possibility of a Berkshire-3G bid puts both Warren Buffett's curious silence and subsequent abstention regarding the Coca?Cola 2014 Equity Plan that he thought was "quite excessive" and the Coca-Cola Board’s machinations to win shareholder approval of the excessive Plan, seemingly at any cost, in a worrisome context,” Winters said in a letter to the independent directors who chair Coca-Cola's Audit, Compensation, and Governance Committees
After expressing the notion Buffett may be talking Coke private on Fox Business, shares moved slightly higher before being knocked down by Warren Buffett going on CNBC and saying there was “absolutely no chance” of a Coke leveraged buyout. Such a deal would be massive, noted Business Insider, who calculated the inflation adjusted value of a Coke LBO to be more than three-times the size of a KKR & Co. L.P. (NYSE:KKR)’s famed 1989 buyout of RJR Nabisco.
David Winters pushing the coke deal
Winters, for his part, persists, noting that in today’s era of cheap borrowing – and with the substantial financial heft Buffett and hedge fund 3G provide – the deal is realistically within reach. Winters not only pushed the deal but appeared to imply that collusion could take place between Buffett, his son and the The Coca-Cola Company (NYSE:KO) board.
“As adviser to longtime shareholders of The Coca-Cola Company (NYSE:KO), we are concerned that a similar type of sweetheart, insider deal for Coca-Cola could, in our opinion, significantly undervalue Coca-Cola and irreparably harm Coca-Cola shareholders. Since Berkshire is Coca-Cola's largest shareholder, owning greater than 9% of the outstanding shares, and Warren Buffett's son Howard serves as a Director of both Coca-Cola and Berkshire Hathaway, we believe our concerns are valid,” Winters wrote in the letter.
Speaking with Aaron Task on Yahoo Finance, Winters denied that he was implying a questionable deal was in the offing, but his words tell a slightly different story.
"The question is: what kind of information flows back and forth here (between Buffett and his son)?" Winters asked in the video interview with Task.
Task drew his own conclusions, Tweeting Tuesday morning “It appears that Winters has gone from asking Buffett for help on Coke's compensation plan to now questioning his integrity after the 'Oracle of Omaha' wouldn't join the campaign (at least not publicly).
Hell hath no fury like a shareholder scorned, I guess, was Task’s humorous observation.