Two weeks ago, Warren Buffett complained publicly about Kraft’s offer. Alice Schroeder says she sees Buffett’s influence in today’s deal.
After much stalling and contention, Cadbury has a agreed to a $19.5 billion takeover by Kraft. Forbes has the scoop:
Just days after Cadbury declared its suitor a “low growth” company with a “long history of underperformance,” the British maker of Dairy Milk chocolates and Dentyne gum capitulated to a raised bid of 840 pence ($13.78) per share. The deal, one of the largest transnational takeovers since the credit crunch, is further sign that food companies are seeking to gain scale by combining, after Mars bought William Wrigley Jr. Co. in 2008 for $23 billion.
The deal, comprising 500 pence cash and 0.1874 new Kraft shares for each Cadbury share, is a 9 percent premium to its previous 770 pence offer and 50 percent higher than Cadbury’s market value before Kraft, based in Northfield, Illinois, went public with its approach in September.
A Kraft-Cadbury combination will create a portfolio with more than 40 confectionary brands, each with annual sales in excess of $100 million. The combination of the pair would create the world’s biggest confectionary company, replacing Mars Inc., and Kraft CEO Irene Rosenfeld said the deal provides “both immediate value certainty and upside potential” as she tried to appease concerns about the loss of Cadbury’s iconic status.
(British) unions are worried there were no clear guarantees from Kraft that it won’t switch manufacturing of some of the 186-year-old company’s chocolates to eastern Europe, sacrificing thousands of British jobs.
Fans of Cadbury are also concerned that Kraft will change the flavor of their beloved chocolate. I don’t blame them–Hershey’s isn’t exactly a connoisseur’s delight. I assume, however, that Kraft is smart enough to keep both the Cadbury brand and its flavors intact.
More interesting is the fact that Irene Rosenfeld sweetened her Cadbury takeover price after Warren Buffett complained. And after Rosenfeld increased the price, Cadbury capitulated. It’s a great example of Buffett at work, albeit not behind the scenes this time.