Kraft Foods’ drawn-out hostile £10.2 billion takeover bid for Cadbury is entering its final stages with other players still poised to move in.
A resulting merger would have huge implications for New Zealand and Australia where both companies own manufacturing plants and are market leaders in confectionery and other food products.
The UK confectionery giant remains adamantly opposed to any takeover while on the sidelines, two other chocolate companies, Ferrero and Hershey, are positioning themselves for a possible slice of the action.
This and next week is critical as Cadbury releases its detailed opposition to the bid. Kraft has until next Tuesday to raise its bid and any other bidders must front up within a further four days.
In other recent developments:
• Cadbury shares closed earlier today at 781p, higher than the current value of Kraft’s offer, with shareholders making it clear that the American group must bid at least 800p a share for any chance of success.
• Cadbury will also this week publish its final results for the past year, which are expected to show encouraging growth in sales and profits. Its final defence against Kraft’s bid is expected to focus on the American company’s poor share price performance since its demerger from the Philip Morris tobacco giant in 2001. Kraft shares, worth $US31 at the time of the demerger, are now worth $US27.
• Italy’s Ferrero is raising £10.5 billion from a local banking syndicate. It has until February 2 to table a formal offer and has been tipped as more likely to join forces with another bidder, such as Hershey of the US, rather than try to mount a counter-bid on its own.
• Kraft has already improved its offer once, increasing the cash component of its bid to 360p a share, and is thought to be looking at ways of raising the offer further. Latest reports say its advisers, Lazard, Citigroup and Deutsche Bank, are considering another boost to the cash part of its bid. However, it has come under pressure from shareholders, not least from Warren Buffett, who have opposed to the issue of new shares.
Meanwhile. the markets are sending contradictory messages about the deal. According to Data Explorers, about 1.6% of Cadbury's stock is out on loan to short sellers last week, down from 3.7% in late November, suggesting the number of people betting a deal will happen has increased.
But some hedge funds, who bought into Cadbury after the bid was originally signaled back in September, are not taking chances.
US fund Mason Capital has exited its entire stake in Cadbury, reportedly at a loss. JGD Management also reduced its stake. But Franklin Resources, which bought into Cadbury because it saw the company as a takeover candidate before Kraft's approach, has raised its stake by more than two million shares.
WHAT HAPPENS NEXT
January 12 The last day Cadbury can mount a defence, and publish key financial details.
January 15 Cadbury won a three-day extension which means it can publishes more financial details after markets close (but it failed to win an extension for its defence documents)
January 19 The last day Kraft can raise its offer - unless other bidders move in
January 23 Deadline others who have already expressed interest in Cadbury such as Hershey and Ferrero, to submit a fully financed bid. If not, they have to wait another six months to mount a bid.
February Deadline for votes from Cadbury shareholders if Kraft is going to exceed the 50% it needs to win. If Kraft fails, it has to wait 12 months before bidding again for Cadbury. Also the deadline for a new bidder to throw their hat into the ring.
Tue, 12 Jan 2010