Cadbury Schweppes Takeover by Kraft

2959 Words Mar 17th, 2011 12 Pages
Cadbury Schweppes Takeover by Kraft

Currently, it is too early to speak of the recovery of American (and global) market of mergers and acquisitions (M&A). The volume of mergers and acquisitions fell by about 37% - to $ 1.75 trillion over the last year, and therefore fees of investment banks decreased (Zhang 2010). The deal between Kraft and Cadbury is the biggest one since March 2009, when Roche Holding completed the purchase of Genentech for U.S. $ 44 billion These transactions indicate the rehabilitation of selected major players and their optimistic assessment of their own investment prospects. Any M&A transaction in the financial crisis is the evidence of the fact that the participants find serious advantages of its
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In the case of accepting the terms of the transaction, Kraft intends to issue 265 million new shares, or 18% of the existing ones. Stockbroker Andrew Wood believes that Kraft has every reason to pursue the acquisition of Cadbury, as this would allow the American company to expand its confectionery business to more effectively compete with Mars. On the other hand, the head of an investment holding company Berkshire Hathaway Warren Buffett, the largest shareholder of Kraft Foods, marked that he felt poor because of this purchase (Chu 2010). He considers the sum of $19.3 billion too high, and the whole deal unsuccessful. Kraft Foods welcomed the entry of Cadbury staff into the family of employees of American companies. However, Cadbury workers do not expect anything well from this merger. In London trade union representatives held a protest against the acquisition that can lead to redundancies of British employees. Trade unions believe that the downsizing will be quite serious: Kraft’s debt is estimated in £22 billion (‘Cadbury agrees Kraft takeover bid’ 2010). British Prime Minister Gordon Brown pled for the British confectionery. It goes not only about possible job losses and transfer of production to other countries, but also in general about giving away the company, which for many British has become a national treasure (House of Common 2010). Cadbury Board of Directors justifies its decision to accept the offer of Kraft

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