maz

A Slightly Sweetened Deal Should Be Good for Cadbury

Hi Veronique,

I follow Cadbury closely and think that absent a second bidder you have hit the nail on the head. In my opinion the current bid will not succeed for two reasons; the most important is that at 717p per share it is simply too low; the second is the proportion of Kraft shares at nearly 60% of the bid. Warren Buffett may be correct that it is a full value because Kraft shares are undervalued but Cadbury investors don't want stodgy old Kraft shares. Trouble for Kraft is they don't have enough cash or can't raise more debt on reasonable terms after the Danone deal.

Even 800p and 50/50 cash/shares may not get it done in a hostile bid but at least that's $53.50 per ADS and may get some to nibble. Media reports of top Cadbury investors wanting 900p ($60 per ADS) "before they get their calculators out" are probably just beating the bushes to drum up higher bids. I also think the reported Sanford Bernstein estimate of 860p ($57 per ADS) and 1020p ($68 per ADS) based on the Mars/Wrigley deal numbers are too optimistic for the reasons you state - the market has changed and Cadbury is not Wrigley!

On the topic of another bidder it could be that one will emerge now that Kraft has finally made a formal offer. I base this on the idea that potential suitors did not have to rush in before Kraft made their bid formal. Even now I think that we are only in the early stages of a long process.

It will be interesting following along.

Discl; I do not own Kraft or Cadbury shares

Cadbury Is Confident Beyond 2011

What a useless commentary after all the recent news article on Kraft's bid for Cadbury. I really expect much more from Zack's