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September 24, 2009

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Cadbury CEO seeks 20% higher bid from Kraft

CADBURY Chief Executive Todd Stitzer believed a 20 percent higher bid from Kraft of about 12.2 billion pounds (US$19.93 billion) would be a fair price, according to a note obtained by Reuters.

He also told investors that he did not expect Kraft to walk away from its proposed acquisition and saw some strategic sense in combining the two companies, while there would be revenue synergies from such a deal.

"On price, Todd seemed to admit that a 15xEBITDA multiple would be a fair price," the note by Bank of America/Merrill Lynch sales specialist Simon Archer said.

Analysts said a multiple at that level put the price for Cadbury at about 900 pence per share, valuing the entire company at around 12.2 billion pounds, up from Kraft's initial bid of 745 pence per share, or 10.2 billion pounds.

Cadbury shares were steady at 788-1/2 pence in early trade yesterday, while the current Kraft cash and share offer is valued at around 718 pence reflecting the recent fall in Kraft shares.

Stitzer also outlined areas where synergies might be found to bolster Kraft's "modest" US$625 million annual synergies target, the note said. He saw revenue synergies between Cadbury and Kraft in countries such as China, Germany and Brazil.

Stitzer and Kraft boss Irene Rosenfeld are attending the two-day Bank of America/Merrill Lynch Global Consumer and Retail Conference in London, where they are speaking to investors.


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