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— Dealmakers —
 On Sept. 7, Kraft Foods Inc. made a surprise bid for Cadbury plc, which was quickly rejected. A Kraft/Cadbury merger, which has been rumored since Sept. 2008, would create a confectionery and snacks giant with over $50 billion in annual sales, uniting Kraft's Philadelphia cheese and Oreo cookies with Cadbury's Dairy Milk chocolate and Trident gum. A takeover of Cadbury has been widely expected since early 2007 when its American CEO, Todd Stitzer, began moves to split off its drinks business. Its takeover prospects improved further when Mars Inc. agreed to pay $23 billion for Wm. Wrigley Junior Co. in April that year. - Jonathan Braude and Laura Board 2009 Nov. 2: Cadbury awaits Kraft's next move: With less than two weeks to go before the deadline for Kraft Foods Inc. to formalize a $16 billion-plus unsolicited bid for Cadbury plc or walk away, observers predict the U.S. company may slightly sweeten -- but won't sugarcoat -- its offer. - Laura Board Oct. 20: Cadbury third-quarter earnings preview: J.P. Morgan Chase & Co. (NYSE:JPM) suggested that Cadbury's sales would be lower than the company's target of 4 to 6 pence in revenue growth. Analysts forecast that for the full year show Cadbury's turnover is likely to be about £5.9 billion ($9.6 billion), up from £5.4 billion in 2008, according to This is Money. - Maria Woehr Oct. 9: Cadbury's Carr regretting tough talking Kraft?: According to Reuters, Carr is facing pressure to "soften his stance" now that Kraft has until Nov. 9 to come up with a formal bid. With hostile takeovers on the verge of making a comeback and more expected this fall, this kind of begs the question: How is one supposed to act when approached with a hostile takeover? - Maria Woehr Oct. 2: Cadbury downplays shareholder suit: Cadbury plc said Friday it considered a complaint against its board filed by American shareholder Steward International Enhanced Value Index Fund as "entirely without merit." - Jonathan Braude Oct. 1: Hershey kisses Cadbury goodbye?: Kraft Foods Inc.'s chances of consuming British confectioner Cadbury plc looked rosier Thursday as smaller rival Hershey Co. appeared unable to muster the financing for a competitive bid. - Jonathan Braude Sept. 30: Kraft Foods given Cadbury bid deadline: The U.K. Takeover Panel on Wednesday gave Kraft Foods Inc. almost six weeks to produce a firm offer for confectionery maker Cadbury plc or retreat. - Laura Board Sept. 30: Kraft fires Vegemite salvo in publicity war: An article published The Wall Street Journal Wednesday touts the success of Kraft's near-complete reorganization, which the company calls Organizing for Growth, and as a totem of the new structure highlights the launch of a new Vegemite brand. - Sara Behunek Sept. 29: Report: Arbs bet Kraft will snag Cadbury: Arbitrage investors, who speculate on companies involved in ongoing deals, are betting that Kraft Foods Inc. will eventually snag U.K. confectioner Cadbury plc -- and will do so without much more of a fight, despite Cadbury CEO Todd Stitzer's recent statement that he does not believe Kraft's proposal makes strategic or financial sense for Cadbury. - Sara Behunek Sept. 28: Kraft CEO makes headlines in the U.K.: Kraft Foods Inc. CEO Irene Rosenfeld worked the U.K. Sunday papers this past weekend, giving interviews to archrivals The Sunday Telegraph and The Sunday Times, as the company waits to hear whether the Takeover Panel will issue it with a deadline to retreat or make a firm offer for confectioner Cadbury plc. - Laura Board Sept. 28: Cadbury defends its CEO: Embarrassed British confectioner Cadbury plc was forced to defend its CEO, Todd Stitzer, on Friday, following days of adverse commentary and a reported threat of regulatory scrutiny. It issued an official statement clarifying his position on a possible £9.84 billion ($15.7 billion) takeover by U.S. suitor Kraft Foods Inc., claiming his remarks had been misconstrued and denying his opposition had softened. - Jonathan Braude Sept. 25: Cadbury clears things up, somewhat: After all the hubbub and possible interest from the U.K.'s Takeover Panel over what Cadbury plc (NYSE:CBY) chief executive Todd Stitzer may or may not have said, the British confectioner issued a statement hoping to clear all doubts about Cadbury's feeling about a takeover by Kraft Foods Inc. (NYSE:KFT).: For the avoidance of doubt, Mr. Stitzer does not believe that Kraft's proposal makes strategic or financial sense for Cadbury and his comments should not be interpreted in any other way. Cadbury's position in relation to Kraft's proposal remains precisely as set out in the letter to Kraft issued on 12 September. - Baz Hiralal Sept. 25: Cadbury's sweet talk 'worries regulator':In appearing to name an acceptable price by specifying multiples of recent food industry transactions and later downplaying the comments as merely indicative, Stitzer and Cadbury may have created the uncertainty the regulator reportedly fears. And by making the comments at a private investor meeting -- they were later disseminated by Bank of America Merrill Lynch sales specialist Simon Archer -- Stitzer has breached Takeover Panel restrictions on selective disclosure, the Financial Times reported. - Laura Board The Deal's Kenneth Klee looks at how a Cadbury-Kraft reorganization would look: Sept 24: Prior to launching a $16.7 billion bid for Cadbury plc (NYSE:CBY) in early September, one of CEO Irene Rosenfeld's biggest initiatives at Kraft Foods Inc. (NYSE:KFT) has been an ambitious restructuring of the company calls Organizing for Growth, launched in 2007 and now mostly complete. Meanwhile, in 2008 Cadbury CEO Todd Stitzer began a corporate realignment Cadbury calls Vision Into Action. Rosenfeld and other top Kraft execs discussed their reorg at some length in a recent article in Strategy + Business, and it makes interesting reading as we try to get a bead on how the two companies would integrate. OFG, as it's (inevitably) known, has a strong decentralization flavor, a result, Rosenfeld says, of the pendulum having swung too far toward central control. Read more here. Sept. 23: Could Kraft tell Cadbury to keep its candy?: Cadbury's Todd Stitzer and chairman Richard Carr could be playing good cop/bad cop with Kraft Inc. (NYSE:KFT). Remember that letter Carr sent to Kraft CEO Irene Rosenfeld last week basically saying the valuation was too low and the company wants to be independent? Well, Stitzer now seems to be pushing for that higher bid. He told The Wall Street Journal he recognizes the synergies between the businesses saying, "If a higher bid does not materialize, I think our shareowners will have to decide whether or not the value of our plan or the value of whatever offer's on the table is appropriate." - - Maria Woehr Sept. 23: Stitzer wants 15 times Ebitda from Kraft?: Cadbury chief executive Todd Stitzer could be warming up to the idea of a merger with Kraft Foods Inc. After recently admitting there was some strategic sense to a deal, Stitzer may have named his price at £12.2 billion ($19.9 billion). Bank of America Merrill Lynch sales specialist Simon Archer said in a note seen by Reuters, "On price, Todd seemed to admit that a 15x Ebitda multiple would be a fair price." That's about 20% higher than Kraft's unsolicited cash-and-stock bid of $16.7 billion. - Baz Hiralal Sept. 22: Cadbury seeks deadline for Kraft bid: Cadbury plc has turned to the Takeover Panel in an attempt to force unwanted suitor Kraft Foods Inc. to either step up with a sweetened offer or leave the confectionery group in peace to continue its restructuring program. The Uxbridge, England, company has requested the regulator issue Kraft with a "put up or shut up" deadline. It would force Kraft to proceed with a firm offer or walk away and be barred from bidding for six months under most circumstances. - Laura Board Sept. 18: Candymaker Cadbury won't trust strangers: Picking up a defense mandate from a sophisticated, multibillion-dollar bid target like British confectionery maker Cadbury plc is a lot tougher than taking candy from children. Sweet-talking won't do the trick, and you won't get your hands on the prize if you have a mellow, soft center. Under attack, a company wants trusted advisers who can mount a quick and ruthless defense. - Jonathan Braude Sept. 17: Will Cadbury get a Hershey/Buffett bid?: The Wall Street Journal is reporting that the Hershey Trust Co., which holds voting control of candy maker Hershey Co. (NYSE:HSY), has hired Warren Buffett's favorite banker, former Goldman, Sachs & Co. (NYSE:GS) banker Byron Trott, and boutique banking firm Watch Hill Partners LLC to advise on a possible bid for Cadbury plc (NYSE:CBY). There were earlier reports that Hershey had hired J.P. Morgan Chase & Co. (NYSE:JPM) to explore options as well. - Maria Woehr Sept. 16: Cadbury: Future is sweet: Cadbury plc CEO Todd Stitzer on Wednesday tried to fend off unwanted suitor Kraft Foods Inc. by painting a bright picture of his company's growth prospects beyond the current restructuring. The Uxbridge, England, maker of Dairy Milk chocolate and Trident gum is midway through a three-year cost-cutting drive dubbed Vision into Action, which Stitzer trumpeted. He said he is confident that by 2011 Cadbury will have achieved its goal of "good mid-teens" profit margins. - Laura Board Sept. 15: Cadbury baking a better offer?: Just in case the executives over at Kraft Foods Inc. (NYSE:KFT) didn't quite understand that the $16.7 billion offer to Cadbury plc (NYSE:CBY) was rejected the first time around, Cadbury chairman Richard Carr went ahead and wrote an open letter to Kraft CEO Irene Rosenfeld spelling out how unattractive the offer is for the confectioner. The letter, however, instead left many wondering if Cadbury is putting fire on the stove to get a tastier offer from Kraft, or even rivals the Hershey Co. (NYSE:HSY) or Nestle SA. - Maria Woehr Sept. 9: Kraft pushes Cadbury union as banks seek funds: Bankers for Kraft Foods Inc. began to arrange financing for its takeover of Cadbury plc as the suitor's CEO said her company would not need to make asset sales to fund the bid. Bloomberg News reported that Citigroup Inc. and Deutsche Bank AG, which form part of a Kraft advisory team led by Lazard, are trying to secure debt financing to cover about half of the stock-and-cash offer for Cadbury. - Laura Board Sept. 8: Kraft CEO sweet-talks Cadbury bid: Kraft Foods Inc. on Tuesday maintained confidence in its unwelcome pursuit of Cadbury plc, flicking aside like a few stray crumbs any concerns about financing or shareholder support. In a conference call, Kraft chairman and CEO Irene Rosenfeld insisted she is comfortable about financing the transaction and securing the support of her own shareholders. - Laura Board and Jonathan Braude Sept. 8: Tasty fees for bankers in Kraft, Cadbury: According to The Telegraph, the advisers$21 billion. - Maria Woehr Sept. 8: With Cadbury's board rejecting Kraft Foods Inc.'s £10.2 billion ($16.7 billion) stock-and-cash offer for Cadbury plc as "fundamentally inadequate," competitors are busy studying whether throwing their hats into the ring makes sense. But for their part, investors are betting on sweetened offer as Cadbury's shares shot past the 745 pence mark, to close 38% higher at 783 pence, and well above the 31% premium to Friday's closing price Kraft first offered. The Deal's George White parses words from other potential Cadbury suitors, and speculates on possible motives to jump into the bidding war -- or avoid it altogether: advisers working on a possible deal between Kraft Foods Inc. and Cadbury plc could get 0.7% to 1.25% of the total deal value. If Cadbury had accepted the £10.2 billion ( $16.7 billion) bid from Kraft, then commissions could have been over £250 million. But it didn't. So, if the valuation increases, fees will be higher. According to analysts Bloomberg interviewed, a deal to take over Cadbury could be as high as
April 20: Fujitsu, De la Rue, Cadbury and Thames are collectively selling their combined 80% stake in Cadbury. Royal Mail, which holds the remaining 20% of Cadbury, has not joined the collective that plans to sell. But any sole buyer of more than 29.9% would have to bid for its stake as well. The Financial Times reports that the deal is reported to have been valued at roughly £250 million ($363.475 million) to £350 million ($508.865 million). Jan. 27: Hershey uses ads to fight Mars-Wrigley, posts sweet quarter: Hershey Co. made a sweet profit this quarter by posting higher-than-expected results amid more competition from the combined Wm. Wrigley Jr. Co. and Mars Inc., a recession and a rise in cocoa costs. - Maria Woehr 2008 And what of that blockbuster Mars-Wrigley deal? David Marcus serves up an analysis. Meanwhile, Dec. 16: Cadbury to sell Australian unit: British confectionery group Cadbury plc put its last remaining drinks business on the block, announcing plans to sell its Australian Beverages unit after establishing it as a standalone operation. -- Jonathan Braude Dec. 24: Cadbury sells the business to Japanese beer group Asahi Breweries Ltd. for £550 million ($811 million). March 12: Japan's largest beer maker, which will pay about A$1.185 billion ($769.5 million) for the unit. So who might buy it? The Deal's Kenneth Klee highlighted some ideas.
Meanwhile, is Cadbury itself on Kraft Foods Inc.'s shopping list?
Speculation has abounded for months, and Citigroup Inc. in late
September downgraded the confectioner on the possibility it could fall victim to a takeover.
Hershey Co. in late September was reportedly working on a deal to sell a 25% stake in itself to Nestle SA, which would give Nestle an option to buy the remainder within two years. According to a Daily Telegraph report Sept. 23, Hershey has also been working with J.P. Morgan since June as it explores strategic options. A deal would be the latest among confectioners and would seem to signal a shift in strategy, given earlier statements. After Mars Inc. unveiled April 28 a $23 billion takeover of Chicago-based Wm. Wrigley Jr. Co., buzz abounded Cadbury, once free from its U.S. drinks business, might look for a deal with Hershey and that more M&A among confectioners might follow. Cadbury's CEO Todd Stitzer said on a conference call June 19 that the company didn't think it needed to do a deal, according to a Reuters report, while it was also looking like Hershey might not bite any time soon and that a joint venture was another possibility. LeRoy Zimmerman, the chairman of Hershey's largest shareholder the Hershey Trust Co., maintained the company was not for sale in an op-ed piece in the Harrisburg, Pa., Patriot-News June 15. He also pointed to other "meaningful options," Klee noted, likely an international joint venture. (At the time, the Kraft-Cadbury speculation was also floating around. See Dealwatch: Kraft Foods for more.)
Nestle SA chairman Peter Brabeck says he doesn't expect to make any acquisitions larger than $200 million to $300 million in the near term, according to Dow Jones Newswires. That dampens speculation ... that the $39 billion the company will get by selling Alcon, its contact lens unit, to Novartis AG in a two-stage deal could provide the wherewithal for a larger deal. ONE BIG BITE The Mars-Wrigley news came hours after reports surfaced in the Wall Street Journal
and the New York Times a deal was imminent. The gum maker has been controlled by they
Wrigley family since its founding in 1891. It seemed the deal could revive merger speculation around Cadbury and Hershey, The Deal's Laura Board noted April 28. Cadbury shareholders approved the de-merger April 11, just days after
news surfaced that Robert Voweler, the CEO of the Hershey Trust, planned to retire in April 2009, as
Reuters pointed out April 13.
Further, Reuters said, a tie-up between the confectioners makes sense,
given Cadbury's slight presence in the U.S. chocolate market and
Hershey's interest in expanding overseas. SPLITTING UP Cadbury on March 19 offered details on the demerger of its U.S. drinks business and confectioner operations, little more than a week after moving to quash fears that a credit-related delay could push back the drinks group's May 7 NYSE debut. Shareholders were to receive 64 shares in the new confectioner business, Cadbury plc, and 12 in Dr Pepper Snapple Group Inc. for every 100 shares they own in Cadbury Schweppes. Based on Cadbury's close March 18, the offer values Dr Pepper at nearly $4 billion and Cadbury plc at just under £10 billion ($19.8 billion). Cadbury listed in London May 2. Dr Pepper followed suit five days later. Cadbury said March 11 the spinoff of was on track to close by May 7, hoping to curb concern of a credit-related delay. The update came nearly a month after Cadbury served up a mixed bag of news Feb. 19, revealing it would not return cash to shareholders after the demerger of its drinks business; disappointing 2007 profits; and the names of the chairmen-to-be for the two companies to remain after the demerger. Citing turbulent debt market conditions, Cadbury said in the statement it would not return cash to shareholders upon the demerger in the interest of preserving investment-grade ratings. The company also said it would bump its 2007 dividend 11% to 15.5 pence. Meanwhile, the company unveiled its North American beverages unit had a sharp drop in profit margins for 2007, which won't recover until 2009, Reuters noted. Cadbury said its full-year pretax profit fell 2% to £915 million ($1.8 billion). And the confectioner and beverage group also announced that deputy chairman Roger Carr would take over as chairman of Cadbury plc, while Wayne Sanders, the former president and CEO of Kimberly-Clark, would take the reins as chairman of Dr Pepper Snapple Group Inc., following the demerger of the North American beverages unit. The update came little more than two months after the company disclosed activist investor Nelson Peltz had lifted his stake in Cadbury Schweppes from 3.4% to 4.5%. Peltz's Trian Partners formed a special-purpose vehicle with Qatar Investment Authority to do so, and the two could seek to further increase the holding, according to a Financial Times report citing sources familiar with the matter. The move looked as if it could also usher in further change for the confection and drinks company, which earlier in 2007 agreed to spin off its U.S. drinks business, likely after some pressure from Peltz. (See more on the drinks sale spinoff decision below.) Meanwhile, the Cadbury news came a month after Hershey's controlling shareholder orchestrated a dramatic board overhaul that inspired the resignation of eight Hershey board members and left only two in place. The sweeping changes led speculation a deal could follow for Hershey and rumored prospective merger partner Cadbury on one extreme, and that it was a move aimed at making the nation's top candy maker a stronger standalone entity, on the other. Hershey Trust, which is a charitable trust that funds the Milton Hershey Academy and controls 78% of voting power in the company through a 31% equity stake, publicly took issue with the company's performance Oct. 10, 2007. The news came nearly two weeks after Hershey announced the pending departure of its chairman and CEO Richard Lenny and about a week ahead of the company announcing a 66% decline in third-quarter profit, citing restructuring charges and higher dairy costs. The company also faces increasing competition from Mars Inc. and other rivals. The trust said Oct. 10 it was not satisfied with the Hershey's results and that it was "actively engaged" in a process to resolve the company's challenges and to implement "new growth strategies." Hershey Trust asked six directors to resign, and two others followed suit on their own accord, the company said Nov. 11. In their place, the trust unveiled planed to install:
Those who would remain on the board include David J. West, the company's COO who was tapped to succeed Lenny and Robert F. Cavanaugh, a Hershey Trust board member. Two additional new board members would be elected by shareholders, the company said. Hershey announced Lenny's resignation Oct. 1. A Wall Street Journal report at the time said he had differences with the trust and was frustrated with a lack of autonomy in running the business. The Journal then said the trust had, without Lenny, met with U.K.-based confectioner and drinkmaker Cadbury, which was spinning off its U.S. drinks business, about a tie-up. But the trust has long maintained it isn't interested in relinquishing voting control of the company. According to Reuters, Cadbury had no comment Nov. 12 on Hershey's board overhaul. But opinion on whether the board shakeup will lead to a deal between the two sweets makers is mixed. "Analysts said a Cadbury-Hershey combination would make strategic sense, but questioned how a deal could be made to work as the Trust would still want to retain control," Reuters said. CNNMoney.com quoted Goldman Sachs: "We believe the shake-up reinforces the trust's strategy (at least near-term) to pursue a route of fundamental improvement via internal methods." CADBURY'S CALLING Meanwhile, in an effort to distill Cadbury -- at the time the world's largest confection and drinks maker -- down to a more profitable essence, the company in March launched an auction for its Americas Beverages drinks business. Market turmoil made a spinoff or an IPO more likely, and the company confirmed Oct. 10 it would list the business on the New York Stock Exchange rather than sell it to private equity investors. Confirming a Financial Times report Sept. 14, a source told Board the company rebuffed an offer worth £6.4 billion to £6.9 billion ($12.8 billion to $13.8 billion) from one of the two PE groups bidding for the unit. Blackstone Group LP, Lion Capital and Kohlberg Kravis Roberts & Co.'s offer included the condition that Cadbury would be responsible for a large piece of the financing. Both sides are, however, still trying to come to terms. The other bid team consists of Bain Capital LLC, Thomas H. Lee Partners LP and TPG. Both groups made unsuccessful bids earlier in the summer. The unit went on the block in March 2007, likely at the urging of activist investor Nelson Peltz. But concern over the debt markets forced the food and beverage group to postpone its deadline for final bids for the unit, scheduled for the last week of July, to give bidders more time to line up financing against a "more stable debt financing market," the company said July 27. Days later, Cadbury said it would consider a demerger of the business rather than abandon the auction entirely. Estimates that the unit could command an £8 billion price tag had been curbed to £7 billion or less. Still, the stall didn't short dealmaking for Cadbury's drinks business; in fact, the company didn't even wait for the live Aug. 9 auction of bankrupt Le-Nature's Inc. operations and warehouses in Latrobe, Pa., offering $19 million, or $100,000 above the stalking-horse offer a day in advance. CUTTING CALORIES Regarding Cadbury's then-auction, Coca-Cola Co. had reportedly approached several private equity teams in the bidding about buying the unit's Snapple and Mott's brands to bolster its tea-based drinks business, according to a Reuters interview with Coke CEO E. Neville Isdell. A deal for the tea and juice units would have helped bolster Coke's position against rival PepsiCo Inc., the Wall Street Journal said July 5, 2007, whose Lipton tea ranked No. 1 in the U.S. ready-to-drink category in 2006. Meanwhile, Indian conglomerate Tata Group plc was said to be interested in the Snapple brand and was in talks with Blackstone and Lion Capital about teaming with them on a deal, the Economic Times said in late June. While it didn't name a buyer, the company outlined a strategy on June 19, 2007 to look toward bolt-on acquisitions as opposed to a major deal as some onlookers had suspected. Cadbury said June 5 it had divested three small businesses it deemed noncore, part of a plan to trim costs on the confection front and hone the London-based company's focus once the drinks business is sold, according to a Reuters report. Plans to move out of Cadbury's expensive London digs, factory closures and reductions in its "global sweets work force" were measures aimed at that end, Reuters said. On the acquisitive front, Cadbury said June 8 it had acquired 93.32% of Romania's No. 2 confectioner Kandia-Excelent SA from Kandia NV, a day after it unveiled plans to buy Turkish gum business Intergum from the Amram family for $450 million, further bolstering its gum division. And in its third small overseas deal in two weeks, Cadbury said June 18 it would launch a friendly takeover of Japan's Sansei Foods. But back to the drinks. Two days after it was revealed Peltz had taken nearly a 3% stake in the confection and drinks maker, Cadbury said it would consider spinning off its North American drinks unit. According to reports from London's Daily Telegraph and Reuters May 18, the company had received about a dozen offers. THE BRANDS A seasoned food company dealmaker, Peltz's ties run deep with some of Cadbury's brands. In 2000, as then-chief executive of Triarc Cos., he sold Snapple Beverage Group to the company for $1.5 billion. Peltz's stake in the world's largest confectionary maker was revealed to be worth nearly $714 million. The company's brands included everything from Cadbury Creme Eggs and Sour Patch Kids candy on the confection side, to Hawaiian Punch and 7-Up on the drinks side. After Peltz's stake was revealed, Cadbury shares traded nearly $5 above where they began the week. The London-based company long seemed due for a sugar jolt, having at the time weathered recent difficulties including a salmonella scare related to its chocolate in the U.K. and accounting errors at a subsidiary in Nigeria. And as Reuters pointed out, marketing around an arsenal of new products and high commodity costs for the company could be a tremendous drain. A snapshot of some Cadbury dealmaking ahead of the drinks auction:
Peltz is a longtime vocal investor in food companies and he has of late lobbied for change at Wendy's International Inc. and H.J. Heinz Co. For more on his Heinz involvement, see a related Dealwatch. Visit the complete Dealwatch Archive |
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