Word: krafts
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...Kraft's unsolicited bid to take out candy giant Cadbury PLC in a GBP10.2 billion ($16.7 billion) deal has Wall Street placing bets on whether rival Hershey Co. will jump into the fray...
Cadbury swiftly dismissed Kraft's bid as too low, but speculation is running rampant on Wall Street that Cadbury is now in play and that either Kraft will sweeten its offer or another rival, such as Hershey, will step up. Industry experts speculate that bidding could exceed $21 billion before a merger is clinched. Read "Chocolate, Meet Choco-Luxe...
Some industry experts now wonder if the Hershey Trust will rethink its stand in light of the Kraft bid. After all, if Kraft ups its ante and succeeds in acquiring Cadbury, it would create a combined company that would rival Mars in size and reduce Hershey to a distant fourth in the confectionary market with only a 4% stake, estimates Stifel Nicolaus analyst Christopher Growe...
That means raising its offer. Kraft's bid puts a price of 745 pence on each share, a 31% premium compared with Cadbury's closing price last Friday, Sept. 4. But analysts agree with Cadbury's assessment that Kraft's approach "fundamentally undervalues the group and its prospects." As a multiple of Cadbury's sales, for instance, Kraft's offer amounts to roughly half that tabled by Mars in its acquisition of Wrigley, says Jeremy Batstone-Carr, an analyst at brokers Charles Stanley in London. Expectation of a second bid from Kraft, a fresh one from Switzerland's Nestl...
...grows - and with it, the prospect of a big payday for the chocolate maker's shareholders - pressure on the firm will mount. Should it choose to cling to its independence, investors might expect something in return. Squeezing more profits out of Cadbury, though, could mean cutting jobs. And with Kraft pledging to preserve U.K. staff as part of its offer, any such move might make Cadbury unpopular. That's left some analysts backing the Americans. Kraft, reckons Batstone-Carr, "has a better than 50% chance of success...