Kraft must make a takeover offer for Cadbury, the chocolate retailer, by Nov. 9 or walk away for six months, the British Panel on Takeovers and Mergers said Wednesday.
Cadbury already rejected an unsolicited, informal Kraft proposal worth $16.7 billion in early September, saying it undervalued the company.
The deadline was made at the request of Cadbury, presumably in the hope that Kraft would both formalize and raise its bid.
By Nov. 9, Kraft must either make a formal bid, or issue a statement that it is walking away from the deal, in which case it could not make another offer for six months.
“If Kraft is smart, it will wait until just before the deadline to see if counterbids are made,” Marco Gulpers, an analyst at ING Financial Markets, said. “We’ve ruled out Nestlé and pretty much Hershey, too.”
Whether Kraft will raise its cash-and-stock offer is uncertain, especially if it faces no serious competition.
Mr. Gulpers said there were major shareholders in Kraft who wanted to restrain management from going much higher, but he added that the company may have to raise the bid, worth 745 pence per share when it was made public on Sept. 7, to “something starting with an eight.”
Warren E. Buffett, Kraft’s biggest shareholder, has called the present offer adequate.
Cadbury shares rose 1 penny, or 0.13 percent, to 800 pence in morning trading in London, a sign that investors think it will end up with a better offer. Its shares are up more than 30 percent for the year.
The British takeover panel sets about a dozen such deadlines per year. Both parties are consulted on the date, and often they differ on what it should be. This ruling has been accepted by both companies, the panel said.
The rationale behind the procedure is, on the one hand, to limit the amount of time a company endures what is akin to a state of siege, and often a distraction to normal business; on the other hand, it prevents a target company’s board from totally excluding a takeover offer, and thus works to the advantage of its shareholders.
Lazard is the lead financial adviser for Kraft, while Centerview Partners, Citigroup and Deutsche Bank are also advising. Citigroup and Deutsche Bank are acting as corporate brokers as well.
UBS, Goldman Sachs and Morgan Stanley are advising Cadbury.– Chris V. Nicholson
Share Investor Blog - Stockmarket & Business commentary
Share Investor New Zealand Business News- Get more business news
Discuss this topic @ Shareinvestor.net.nz
Share Investor's Daily Forex Updates
Recommended Amazon Reading
Kraft Foods Inc. Business Background Report by ChoiceLevel Books
Buy new: $12.99
Usually ships in 24 hours
Cadbury's Purple Reign: The Story Behind Chocolate's Best-Loved Brand by John Bradley
Buy new: $37.96 / Used from: $27.47
Usually ships in 24 hours
Kindle 2/Kindle DX: Amazon's New Wireless Reading Devices (Latest Generation)