Hmm..how many times did we buy at least a bar of Cadbury when we had our brakes?!..yeh the world is struggling to come out of this crisis, but the chocolate lovers who might be stressed managers of big firms already did!
Kraft made a $16 billion offer then rejected in September to acquire the British company Cadbury and the deal for Kraft is becoming very uncomfortable for the board and for the shareholders.
As shown from the recent results of Cadbury, the company has performed quite efficiently in terms of profitability and revenue during this year. Which might attract many big names of the sector such as Nestle or Hershey, but Kraft is the only interested in the bid.
Media Analysis:
The Wall street Journal analyses the deal from the prospective of Kraft. It writes about the fears of the Kraft's' shareholders that would overpay the deal and this in fact led to the its shares to drop by 4%. It also gives an overview of Kraft's performance over the past years. Considering the operating margin which fell to 12.9% last year from 21% in 2002. Having difficulties with steady growth this would mean a cost reduction will be on the horizon and that fresh plans needs to be addressed in order to revive the growth. It also underline the effect of commodity price in the cost cut made to improve margins.
On the other hand, Blopmberg in my opinion gives a better overall view of both companies situation. It starts with analyzing the numbers as often occurs with Bloomberg's articles. Then analysts opinion are brought to give different views from different perspectives. For instance, analyst stated "Kraft will probably raise their bid by as much as they can straight up, and walk away if its not good enough for investors" which shows how confident Cadbury shareholders are towards the British company. Adding "that Cadbury investors may seek 850 pence to 900 pence a share" which is 23% above the offer value based on Kraft's closing share price on last Friday. Another analyst sees it differently. He thinks that "the estimate share price that investors seek is from 840 pence to 875 pence, believing that there is a growing possibility that the deal will not happen. Explaining the possible scenario "is that Kraft is the only bidder and that will need to raise the initial offer made of $16 billion, and that there is a chance to believe that Cadbury will still be independent due to shareholders rejection"
The article continue to give a better understanding than any other article that I found explaining also reasons why Cadbury shareholders should keep their shares even if there would be a "short-term pain".
The last article that I have found is the Timesonline, which isn't very long and does just give a short explanation of the whole situation of the bid. Showing just facts and figures of both companies. But also stating at the end that the offer will probably be rejected by Cadbury due to the low premium that Kraft will offer after the first offer made in September.
My opinion is that this bid needs to fail. The history of Cadbury to Britain has been important I think. And as many other flag company that has been sold this will not help the image of "made in the UK" to expand and grow as expected from many people as they wish to, like the "made in China or Italy". Selling off this kind of name and brand away won't help the workers of the company too to find a job right now in this period of recession.
References:
-Wall Street Journal: Printed copy
-Bloomberg
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=avyHZqpeV4S8
-Timesonline
http://business.timesonline.co.uk/tol/business/
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