Today news broke that Kraft Foods will buy British candy maker Cadbury for about $19.6 billion.
Kraft Chief Executive Officer Irene Rosenfeld injected more cash into her bid and dropped the number of new shares in the offer to win over Cadbury Chairman Roger Carr and mollify billionaire investor Warren Buffett, the U.S. food company’s top shareholder.
The deal would create the world’s biggest confectioner, and analysts see little likelihood of a counterbid. It marks the largest European food and beverage deal on record, according to Thomson Reuters data.
“Kraft has acquired a great asset at a great price and should be given credit for this,” said Sanford C. Bernstein analyst Andrew Wood. “We consider that this is a bargain — the lowest multiple of any major M&A deal in the global food space in well over a decade.”
The combined company will just overtake privately owned Mars-Wrigley as the world’s top sweet maker, bringing under one roof Cadbury’s Dairy Milk chocolate and Trident gum and Kraft’s Milka, Toblerone and Terry’s chocolate brands.
Kraft sought Cadbury because of its strong growth in emerging markets, like India and Latin America. Kraft, famed for its Oreo cookies and Philadelphia cream cheese, derives over half its sales from the mature North American market.
Analysts say a counter bid for Cadbury is unlikely. The UK Takeover Panel gave Hershey (HSY.N), the U.S.-based maker of Hershey’s Kisses and Reese’s peanut butter cups, and Italy’s Ferrero, which makes Nutella chocolate spread and Tic-Tac candy, until January 25 to make a firm offer.
Hershey declined comment on the Kraft-Cadbury deal, but a source familiar with the matter said the company was unlikely to compete with Kraft’s raised bid.
With the Kraft-Cadbury deal, Hershey may have missed its best chance to escape the confines of the mature U.S. market, analysts said. Hershey was hamstrung by its unique ownership structure in which it is controlled by a charitable trust.
Source: Reuters