Sunday, September 13, 2009

Kraft's Proposed Acquisition of Cadbury

Last week, Kraft announced a $16 billion offer to acquire British confectionary company, Cadbury. Potential benefits include providing Kraft access to new distribution channels, especially foreign markets, where Cadbury is particularly strong.

Cadbury rejected the offer saying that the 31% premium to its stock price at the time “fundamentally fails to reflect the current value of Cadbury as a standalone business.” Kraft shareholders appear to be skeptical that the synergies from the potential acquisition will exceed the premium Kraft would eventually have to pay - Kraft's stock fell around 7% following announcement of the offer.

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