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Buffett Knows When to Break His Rules

Stocks in this article: KFT CBY BNI

NEW YORK ( TheStreet) -- Sometimes, even Warren Buffett breaks his own rules.

As he has explained in the past, Buffett has traditionally been opposed to his investment companies issuing new shares of company stock to fund debt or participate in mergers and acquisitions. Additionally, the investor has said he does not believe in stock splits, claiming that the action simply cuts one pie into more pieces.

His disapproval stems from the fact that these actions can come with side effects that are detrimental for shareholders. By flooding the market with additional shares, the value of the stock can take a hit and shareholder power is diluted.

Recently his feelings on this topic surfaced when Buffett attempted to use his authority to extinguish Kraft (KFT)'s most recent $17 billion hostile takeover bid for Cadbury (CBY).

In order to fund the bid, Kraft officials hoped to receive shareholder approval to issue 370 million additional shares of KFT. The Oracle criticized the planned offer, warning CEO Irene Rosenfeld and shareholders to avoid overpaying for the U.K. candy maker.

Buffett, Kraft's largest shareholder with more than 9% of the company's stock, would suffer a big loss if the shares plummet.

Interestingly, though Buffett has made it clear that he is opposed to any offer presented by Kraft which includes the excessive use of company stock, he appears to be singing a different tune when it comes to his own multi-billion dollar acquisition of Burlington Northern Santa Fe (BNI).

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