{"id":206366,"date":"2010-01-20T23:57:00","date_gmt":"2010-01-21T04:57:00","guid":{"rendered":"tag:blogger.com,1999:blog-3087194156628161158.post-8532205312203016353"},"modified":"2010-01-21T00:00:05","modified_gmt":"2010-01-21T05:00:05","slug":"share-investor-blog-cadbury-aquisition-a-good-deal-for-kraft","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/206366","title":{"rendered":"SHARE INVESTOR BLOG: Cadbury aquisition a good deal for Kraft"},"content":{"rendered":"

\"\"<\/a>I am still following the Kraft Inc [KFT.NYSE<\/span><\/a>] acquisition of Cadbury PLC [CBRY.LSE<\/span><\/a>] . A conditional deal<\/a> for sale of Cadbury to Kraft has been approved by Cadbury management but it still needs the approval of both Kraft and Cadbury shareholders.<\/p>\n

Nearly 10% shareholder of Kraft, Warren Buffett, publicly came out against a deal on Jan 5<\/a> and today on CNBC indicated that he would have voted against the acquisition<\/a>.<\/p>\n

The latest comment, if it isn’t just being made to blow off some steam, appears to suggest that Kraft is paying too much for the maker of Dairy Milk<\/span>, Jaffas, Chrunchie , Moro<\/span> and other well known brands but this is where Buffett and myself part company.<\/p>\n

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Cadbury is a global brand and has dominance in the majority of the markets that it operates in, New Zealand is no exception.<\/p>\n

Because of its strong brand position globally, its potential<\/span> to grow in all its markets – especially in Asia – and the largely untapped market for Cadbury in the United States -where Cadbury is a minor player – the price to be paid for full control of the company must show a healthy premium to its recent trading activity. Cadbury has a strong economic moat – good brands, with high cashflow with a reasonable barrier to entry by competitors.<\/p>\n

Warren Buffett seems to be ignoring this fact and it seems contrary to previous indications by him that in order to gain control of a company during an acquisition a premium is more often than not paid.<\/p>\n

The price being paid by Kraft for Cadbury isn’t the deal of the century but it is approaching fair price – on Kraft’s part – considering what Kraft are getting for their shareholders moola.<\/p>\n

Locally, New Zealand media have been speculating that Cadbury’s Dunedin factory maybe the subject of staff cuts<\/a> and that local brands maybe for the cut<\/a>. While this is of course possible because of Kraft’s high debt levels due to the acquisition and pre-deal debt levels, it would be folly on Kraft’s part to repeat the recent mistakes<\/a> of Cadbury in New Zealand and in other global markets.<\/p>\n

I am having sugar overload over this deal. The Kraft acquisition of Kraft is not yet a fait a compli however, so there is still room for a diabetic attack. There is still time for other Cadbury tyre kickers like Hershey to make a higher bid for some of the sweet brown stuff.<\/p>\n

Cadbury @ Share Investor<\/span><\/p>\n

Bitter – Sweet Chocolate Business<\/a>
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Cadbury could learn a thing or two from 1980’s Coca Cola Experiment<\/a><\/p>\n

Discuss this topic @ Share Investor Forum<\/a> – Register<\/strong><\/strong><\/a> free
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Related Links<\/span><\/p>\n

CNBC VIDEO: Becky Quick One-On-One with Warren Buffett – 21\/01\/10<\/a><\/p>\n

Related Amazon Reading<\/span><\/p>\n

\"<span<\/a>
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Cadbury’s Purple Reign: The Story Behind Chocolate’s Best-Loved Brand<\/a> by John Bradley<\/span>
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Buy new: $37.96 \/ Used from: $29.61
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Usually ships in 24 hours<\/span><\/p>\n

\"Kraft<\/a>
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Kraft Foods Inc. Business Background Report<\/a> by ChoiceLevel Books<\/span>
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Buy new: $12.99
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Usually ships in 24 hours<\/span><\/p>\n

c Share Investor<\/a> 2010<\/span>
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