It may come as news to some of you chocolate lovers that British based “Cadbury PLC” is currently being bid at, by American company Kraft Foods Inc. In September 2009, the initial bid by Kraft was rejected by Cadbury. Recently though, on November 9th Kraft once again released another bid for the popular chocolate business, with an offer of US$16.4 billion.
Todd Stitzer, Cadbury chief executive indicates that they turned down the offer because “a link-up with Kraft made no strategic sense.” He also believes that Cadbury on its own “has a strong future as an independent candy maker."
Perhaps Kraft’s valuation of the company is in fact low, making Cadbury worth a lot more than they think it is. Cadbury is known as the world’s second largest chocolate confectionary business, while Kraft is No.5 within the same category.
Although the result of acquisitions may limit costs and decrease competition in the marketplace, the effects on either company will require a long transition process. At this point, it seems like Kraft is the one that needs the acquisition to go through more so, than Cadbury.
The truth of the matter remains, that the bidding process has become an increasingly hostile and tense situation for the bidder. Cadbury is not willing to be bought out at such a low price, while Kraft is finding difficulty increasing their bid, due to their own internal financial challenges.
By February 2010, Kraft will have its final chance to make a new bid for Cadbury -- and that is when we’ll see if one of the world’s most popular and much-loved chocolate brands will be like so many other businesses that go down in the history of mergers and acquisitions. In my personal opinion, I agree with Stitzer's view and greatly value the Cadbury brand as an empire on its own -- I also think it has the potential to continue its independent stream of success.
Any thoughts or predictions on how this will play out?
-Nikita
