{"id":143622,"date":"2010-01-05T23:19:00","date_gmt":"2010-01-06T04:19:00","guid":{"rendered":"tag:blogger.com,1999:blog-3087194156628161158.post-3327745667125798133"},"modified":"2010-01-05T23:22:28","modified_gmt":"2010-01-06T04:22:28","slug":"ny-times-kraft-bolsters-its-hostile-bid-for-cadbury-by-raising-new-cash","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/143622","title":{"rendered":"NY TIMES: Kraft Bolsters Its Hostile Bid for Cadbury by Raising New Cash"},"content":{"rendered":"

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By MICHAEL J. de la MERCED<\/a> and CHRIS V. NICHOLSON<\/div>\n

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Published: January 5, 2010 <\/div>\n

Kraft Foods<\/a> took a big step on Tuesday to shore up its $16 billion hostile bid for Cadbury<\/a>, the British confectioner, by selling one of its most profitable units to Nestl\u00e9. <\/p>\n

<\/a> <\/p>\n

But Kraft\u2019s largest shareholder, Berkshire Hathaway, urged the company to be cautious<\/a>.<\/p>\n

By selling its North American pizza unit to Nestl\u00e9 for $3.7 billion in cash, Kraft raised money to increase the cash portion of its Cadbury offer<\/a>, though it did not raise its overall price. Kraft also took out a potential rival in Nestl\u00e9, which said it had no plans to pursue an offer.<\/p>\n

Analysts and investors have wondered for weeks whether Nestl\u00e9 was preparing to make a bid, speculation that grew on Monday after Nestl\u00e9, based in Switzerland, said it would sell its remaining stake in the eye care company Alcon<\/a> for $28.1 billion. Instead, it chose to bolster its presence in the North American frozen-pizza business, acquiring brands like DiGiorno and Tombstone in the United States, Delissio in Canada and the California Pizza Kitchen<\/a> trademark.<\/p>\n

Yet an unexpected wrinkle also arose when Berkshire, the conglomerate controlled by Warren E. Buffett<\/a>, said in a statement<\/a> that it opposed Kraft\u2019s plan to issue up to 370 million new shares to support its Cadbury offer. Berkshire, which holds a 9.4 percent stake in Kraft, said it was worried that the company might spend too much and dilute its shareholders. It pointed to Kraft\u2019s $3.6 billion stock buyback \u2014 at $33 a share \u2014 as proof that issuing too much new stock at today\u2019s prices would be wasteful.<\/p>\n

\u201cThe share-issuance proposal, if enacted, will give Kraft a blank check allowing it to change its offer to Cadbury \u2014 in any way it wishes \u2014 from the transaction presented to shareholders in the proxy statement,\u201d Berkshire said. The company added that it would change its mind if Kraft\u2019s final bid, due Jan. 19, did not harm its investors. Kraft shareholders will vote on the new shares proposal on Feb. 1.<\/p>\n

While Cadbury has said that it would prefer independence than absorption into a low-growth food conglomerate, the company has also said that it would consider bids that were high enough. Analysts estimated \u00a38, or $12.80, a share as a starting point. <\/p>\n

Cadbury\u2019s chairman, Roger Carr, derided Kraft\u2019s offer, saying its talk of discipline was \u201csimply a smokescreen to justify an attempt to steal from the Cadbury shareholders.\u201d<\/p>\n

But Kraft is under pressure from investors not to dilute their holdings too greatly, limiting the amount of stock it can issue. Mr. Buffett said last year that he believed Kraft\u2019s original offer was a \u201cpretty full\u201d price. At the same time, Kraft has vowed to maintain an investment-grade rating.<\/p>\n

By selling its North American pizza business<\/a>, Kraft plans to offer an additional 60 pence a share in cash to Cadbury shareholders. Kraft had begun talks with Nestl\u00e9 over the pizza business before it bid for Cadbury, according to a person briefed on the matter.<\/p>\n

Jon Cox, a food and beverage analyst at Kepler Capital Markets based in Zurich, said he did not believe Berkshire\u2019s opposition would sink the deal.<\/p>\n

\u201cIt has a negative impact, but I still think the shareholders will approve the deal,\u201d he said, adding that Kraft would be buying Cadbury relatively cheaply, compared with similar recent deals.<\/p>\n

With Nestl\u00e9 bowing out, Kraft\u2019s remaining potential rivals are Hershey and Ferrero, the Italian chocolate maker, neither of which has yet presented a competing proposal.<\/p>\n

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