{"id":200083,"date":"2010-01-19T07:16:00","date_gmt":"2010-01-19T12:16:00","guid":{"rendered":"tag:blogger.com,1999:blog-3087194156628161158.post-3580507742048289053"},"modified":"2010-01-19T12:40:08","modified_gmt":"2010-01-19T17:40:08","slug":"smart-money-cadbury-accepts-19-6-billion-offer","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/200083","title":{"rendered":"SMART MONEY: Cadbury Accepts $19.6 Billion Offer"},"content":{"rendered":"<p><b>GOOD MORNING.<\/b> stocks in Asia closed mixed today; U.S. futures are pointing to a lower open.<\/p>\n<div class=\"KonaBody\">\n<div id=\"content_ad\" style=\"width: 300px; float: right; margin-left: 10px;\">\n<div>                 <noscript> <\/noscript>                  <\/div>\n<\/div>\n<\/div>\n<div class=\"KonaBody\">\n<p>By any stretch, $19.6 billion should buy you a lot of Dairy Milk chocolate and Trident gum. But now that <span class=\"company\">Kraft Foods<\/span> (<a href=\"http:\/\/www.smartmoney.com\/quote\/KFT\/\" smsym=\"KFT\" lq=\"1\">KFT<\/a><span id=\"q_0_0\">: <\/span><span id=\"q_0_1\" dqsym=\"KFT\" class=\"dqPrice dqNoChgTic\"> 29.58, <\/span><span id=\"q_0_2\" class=\"dqNetChg dqUp dqNetChg dqNoChgTic dqNetChg dqNoChgTic dqNetChg dqNoChgTic dqNetChg dqNoChgTic dqNetChg dqNoChgTic dqNetChg dqNoChgTic\">+0.46, +1.57%<\/span>) has struck a deal for <span class=\"company\">Cadbury<\/span> (<a href=\"http:\/\/www.smartmoney.com\/quote\/CBY\/\" smsym=\"CBY\" lq=\"1\">CBY<\/a><span id=\"q_1_0\">: <\/span><span id=\"q_1_1\" dqsym=\"CBY\" class=\"dqPrice dqNoChgTic\"> 51.90, <\/span><span id=\"q_1_2\" class=\"dqNetChg dqUp dqNetChg dqNoChgTic dqNetChg dqNoChgTic dqNetChg dqNoChgTic dqNetChg dqNoChgTic dqNetChg dqNoChgTic dqNetChg dqNoChgTic\">+0.06, +0.11%<\/span>)\u2014creating the world\u2019s largest confectioner&#8211;will it pay off for shareholders?<\/p>\n<\/div>\n<div class=\"KonaBody\">\n<p>Cadbury\u2019s board accepted a deal for the company at 850 pence (including a special 10 pence dividend) or roughly $19.6 billion, 50% above Cadbury\u2019s share price before Kraft\u2019s initial offer in early September. The higher bid includes 500 pence per share in cash, up from 300 pence, and the rest in Kraft shares. Large Kraft shareholders such as Warren Buffett had opposed giving Kraft a blank check to issue millions of shares to fund the deal, a move that could have sharply diluted earnings. Kraft plans to issue 265 million new shares to fund the deal, compared with its original plan to issue 370 million. But Kraft said the deal would add around 5 cents to earnings in 2011, providing a percentage return on the deal in the mid-teens. The higher cash component appears to have swayed Cadbury\u2019s board. Question now: whether Kraft shareholders will see a higher long-term share price too.<\/p>\n<\/div>\n<div class=\"KonaBody\">\n<p>Cadbury\u2019s profit growth certainly looks attractive. Operating profit margins have been rising, thanks in good measure to its highly lucrative gum business, and should hit 14.7% this year, up from 13.5% in 2009, estimates Jefferies analyst Simon Marshall-Lockyer. Organic revenue growth should hit 6.5% this year, up from 4.8% in 2009, he notes, and sales are growing more rapidly in emerging markets, which account for 38% of Cadbury\u2019s global sales, versus 20% for Kraft. Chocolate and gum also tend to generate higher margins than staple grocery items, Kraft\u2019s main business. And Cadbury\u2019s revenues have been growing steadily in North America\u2014up 13% in the fourth quarter\u2014while Kraft\u2019s sales are expanding at a fraction of that pace. Kraft is paying 13 times Cadbury&#8217;s underlying 2009 profits\u2014not cheap, analysts say, but not excessively rich either.<\/p>\n<\/div>\n<div class=\"KonaBody\">\n<p>Of course, the history of big \u201ctransformational\u201d deals is littered with failures, and integrating the supply chains, manufacturing plants and global operations of such large firms will be no easy feat. Kraft has been trying to decentralize operations, while Cadbury has been streamlining its business units\u2014both aimed at improving profitability. &#8220;We have great respect for Cadbury\u2019s brands, heritage and people,\u201d said Kraft CEO Irene Rosenfeld in a statement. The challenge now: coming up with a joint recipe for success.<\/p>\n<p><a name=\"comments\"><span style=\"font-weight: bold;\">Share Investor Links<\/span><\/a><a name=\"comments\"><\/a><\/p>\n<p><a href=\"http:\/\/www.shareinvestorblog.com\/\">Share Investor Blog<\/a> &#8211; Stockmarket &amp; Business commentary<br \/>\n<br \/><a href=\"http:\/\/shareinvestornz.blogspot.com\/2007\/02\/new-zealand-business-news.html\">Share Investor New Zealand Business News<\/a>&#8211; Get more business news<br \/>\n<br \/>Discuss this topic @<a href=\"http:\/\/www.shareinvestorforum.com\/\"> Share Investor Forum<\/a> &#8211; <a href=\"http:\/\/shareinvestorforum.com\/ucp.php?mode=register&amp;sid=450a61250472e03fa25c205c9c1723f1\"><strong>Register<strong><\/strong><\/strong><\/a> free<br \/>\n<br \/><a href=\"http:\/\/www.currency-market.blogspot.com\/\">Share Investor&#8217;s Daily Forex Updates<\/a><\/p>\n<p><span style=\"font-weight: bold;\">Recommended Amazon Reading<\/span><\/p>\n<table id=\"searchResults\" cellspacing=\"0\">\n<tbody>\n<tr class=\"clsOdd\">\n<td class=\"tdimage\"><a href=\"http:\/\/astore.amazon.com\/shareinvestorbookstore-20\/detail\/0966446127\"><img decoding=\"async\" src=\"http:\/\/ecx.images-amazon.com\/images\/I\/315%2BfrL4YuL._SL75_.jpg\" alt=\"The Essays of Warren Buffett: Lessons for Corporate America, Second Edition\" \/><\/a><\/td>\n<td class=\"tddescription\"><a href=\"http:\/\/astore.amazon.com\/shareinvestorbookstore-20\/detail\/0966446127\">The Essays of Warren Buffett: Lessons for Corporate America, Second Edition<\/a> by <span class=\"by\">Warren E. 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By any stretch, $19.6 billion should buy you a lot of Dairy Milk chocolate and Trident gum. But now that Kraft Foods (KFT: 29.58, +0.46, +1.57%) has struck a deal for Cadbury (CBY: 51.90, +0.06, +0.11%)\u2014creating the world\u2019s largest [&hellip;]<\/p>\n","protected":false},"author":833,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-200083","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/200083","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/833"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=200083"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/200083\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=200083"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=200083"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=200083"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}