Kraft Foods Inc. (NYSE:KFT) may be holding strong at its original bid for Cadbury plc (NYSE:CBY) (much to the chagrin of the latter), but hedge fund manager John Paulson seems to think the snack food giant will eventually up its offer. According to a regulatory filing, Paulson doubled his stake in Cadbury to 2.1% on Monday, scooping up an additional 14.8 million shares.
FT Alphaville notes that short sellers appear to share Paulson's sentiments. "According to Data Explorers, the short base in Kraft -- a measure how much of its total share pool is on loan -- has risen by 45% in the past week. Meanwhile, utilization -- the amount of stock available to borrow that has actually been borrowed -- now stands at 4.2%."
Paulson shelled out £112 million ($187 million) for the shares, which have since dropped in value. However, as he is not alone in his presumption that Kraft will ante up, he isn't the only one taking a hit. Bloomberg writes:
Other long-term investors and hedge funds doing takeover arbitrage have lost money on some of their Cadbury investments. Eric Mindich's Eton Park Capital continued buying Cadbury shares in September at levels above 800 pence. Franklin Resources Inc., which has become the largest Cadbury shareholder since Kraft disclosed its approach, continued to build its stake at levels above 790 pence.
Check out the regulatory filing after the jump. You can also track Kraft and Cadbury's dealmaking using our Dealwatch feature here. - Sara Behunek
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