Kraft Foods Inc. (NYSE:KFT)
reports its third-quarter earnings on Tuesday. Positive results are likely to strengthen its position if it bids to take over Cadbury plc (NYSE:CBY).
Analysts predict that earnings this quarter will be 48 cents per share on revenue of $10.32 billion, according to
Reuters. The results will be up from 44 cents for the same quarter last year.
It's
not likely that management will bring up the offer for Cadbury at the shareholder meeting Tuesday because it is deciding if it will make a formal bid before
a Takeover Panel deadline on Nov. 9.
Analysts predict that Cadbury's CEO Todd
Stitzer is likely to reject any Kraft offer under 800 pence ($13.11) a
Cadbury share, but so far no other bidders have stepped forward. According to
Reuters, a source with knowledge of the situation said, "Any bid that starts with a 7 will be rejected by Cadbury,
and we see the grey area for talks between 800-830 pence."
If Kraft does decide to bid, it will have to put enough cash on the table to make the offer attractive. Kraft has 300 pence in cash, according to Reuters, and Martin Deboo at Investec Securities told the news organization that "Kraft will struggle to fund more than 400p of the bid price in
cash without the loss of their investment-grade rating."
With that in mind, analysts and shareholders will be paying close attention to the results of some brands in case Kraft needs to divest businesses to raise more cash.
- Maria Woehr
.
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