The Wall Street Journal
The phony chocolate war is nearly over. Kraft has until Nov. 9 to make up its mind whether to make a formal offer for Cadbury or walk away.
Assuming Irene Rosenfeld, chairman and chief executive of the U.S. food giant, goes ahead, her first task is to decide whether to improve on Kraft's original cash and share proposal, so swiftly rejected by the Cadbury board last month. At this stage, it's hard to see why she should.
For Ms. Rosenfeld, the chief calculation is whether a higher offer now might yield a recommended deal. That looks a long shot. Cadbury has already signaled it thinks the company is worth more than the current share price of just over 800 pence. Yet this is well above Kraft's original cash-and-share offer, which valued Cadbury at around 745 pence a share.
Besides Ms. Rosenfeld is up against Cadbury Chairman Roger Carr, a skilled takeover tactician who during his long career has seen off hostile bids for Williams Holdings, Six Continents and Mitchells & Butlers. At Thames Water, he recommended a takeover by RWE at a fat premium the German company came to regret. Unless Kraft tables an eye-watering bid, Mr. Carr will dare it to go hostile and appeal directly to shareholders.
There's no point in Kraft bidding against itself. So far there is no sign of any other bidders. Even if Hershey and Nestlé overcome their funding and regulatory obstacles, they are likely to wait for Kraft to make its move.
True, Kraft can't leave its bid entirely unchanged. At the least, it will need to adjust its bid to allow for the fall in Kraft shares that has reduced the value of the original bid to 724 pence a share. But beyond this, Kraft would do better to wait for the defense to play itself out. If no counteroffer emerges, Kraft may find a modest sweetener is all that is needed to win support from Cadbury shareholders. After all, the alternative is watching the shares slump back towards prebid levels, counting instead on management to deliver promised improvements in sales and margins.
Of course, this strategy contains risks. Hostile bids -- particularly share deals -- are two-way streets. Ms. Rosenfeld and Kraft will find themselves fair game, as their own track records and strengths and weaknesses come under relentless scrutiny. That ultimately may be the deciding factor: whether Kraft is up for what is likely to be a bloody fight.
Assuming Irene Rosenfeld, chairman and chief executive of the U.S. food giant, goes ahead, her first task is to decide whether to improve on Kraft's original cash and share proposal, so swiftly rejected by the Cadbury board last month. At this stage, it's hard to see why she should.
For Ms. Rosenfeld, the chief calculation is whether a higher offer now might yield a recommended deal. That looks a long shot. Cadbury has already signaled it thinks the company is worth more than the current share price of just over 800 pence. Yet this is well above Kraft's original cash-and-share offer, which valued Cadbury at around 745 pence a share.
Besides Ms. Rosenfeld is up against Cadbury Chairman Roger Carr, a skilled takeover tactician who during his long career has seen off hostile bids for Williams Holdings, Six Continents and Mitchells & Butlers. At Thames Water, he recommended a takeover by RWE at a fat premium the German company came to regret. Unless Kraft tables an eye-watering bid, Mr. Carr will dare it to go hostile and appeal directly to shareholders.
There's no point in Kraft bidding against itself. So far there is no sign of any other bidders. Even if Hershey and Nestlé overcome their funding and regulatory obstacles, they are likely to wait for Kraft to make its move.
True, Kraft can't leave its bid entirely unchanged. At the least, it will need to adjust its bid to allow for the fall in Kraft shares that has reduced the value of the original bid to 724 pence a share. But beyond this, Kraft would do better to wait for the defense to play itself out. If no counteroffer emerges, Kraft may find a modest sweetener is all that is needed to win support from Cadbury shareholders. After all, the alternative is watching the shares slump back towards prebid levels, counting instead on management to deliver promised improvements in sales and margins.
Of course, this strategy contains risks. Hostile bids -- particularly share deals -- are two-way streets. Ms. Rosenfeld and Kraft will find themselves fair game, as their own track records and strengths and weaknesses come under relentless scrutiny. That ultimately may be the deciding factor: whether Kraft is up for what is likely to be a bloody fight.
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