November 9, 2009 / 1:36 PM / 10 years ago

INSTANT VIEW: Kraft plays long game in Cadbury pursuit

LONDON (Reuters) - Kraft made a formal but unchanged bid for Cadbury on Monday, leading analysts to predict the U.S. food giant was ready to play a long game in its unrequited courtship of the British confectioner.

Following are reactions to the Kraft statement.

AN UNNAMED TOP 25 CADBURY SHAREHOLDER

“It’s all a bit of an anticlimax but this is the beginning of a formal process so there’s no immediate payday.

“For long-term shareholders, given what has been offered and given there is no significant improvement in the offer, we will just say no. And also we have to take into account what we have seen about the relative growth rates of Cadbury and Kraft recently.

“I think something closer to 9 pounds — not scraping over 8 pounds — will have us scrambling for our calculators. Whilst it would be possibly unrealistic for Kraft to think that’s what they want to pay, they also have to consider that it may be unrealistic that anyone is going to sell it to them at that price.

“If you bolt Cadbury onto a very slow-growing Kraft business, the overall returns over the long-term or even the medium to long term are going to be lower than just having shares in the faster growing Cadbury bit.”

ROGER CARR, CHAIRMAN, CADBURY

“The repetition of a proposal which is now of less value and lower than the current Cadbury share price does not make it any more attractive.

“As a result, the board has emphatically rejected this derisory offer and has strengthened its resolve to ensure the true value of Cadbury is fully understood by all.

“Kraft’s offer does not come remotely close to reflecting the true value of our company, and involves the unattractive prospect of the absorption of Cadbury into a low growth conglomerate business model.”

JEREMEY BATSTONE-CARR, ANALYST, CHARLES STANLEY

“I don’t believe that it’s enough. There will be an imminent rejection without question of doubt. As it stands at the moment, I don’t think it has the faintest chance of success so Kraft will have to raise its offer if it is to achieve success.

“Cadbury shareholders will be extremely underwhelmed by this as it stands and will have no desire to accept the offer as it is currently presented. Without a shadow of doubt, Kraft will have to raise the cash component.”

DARREN SHIRLEY, ANALYST, SHORE CAPITAL

“This bid makes talk of Cadbury being worth 8.50 pounds per share look a bit out of line. 8.50 would be an 18.5 percent premium to the offer on the table now, which is some way off.

“I guess Cadbury’s shareholders will be waiting for a counter bid to try and push the price up now.”

UNNAMED ANALYST, REDBURN PARTNERS

“I think this bid is far too low and will almost certainly fail. There’s no chance that this bid will stand a chance because around 7.10 pounds is far too low a multiple and I see somewhere around 8 pounds perhaps being more acceptable.”

ERIN SWANSON, ANALYST, MORNINGSTAR

“Cadbury stock price has trickled down ... since no other bidders have emerged.

“In terms of Kraft’s motivation at this point, they are essentially bidding against themselves, given that nobody else has come forward.

“The cash portion might not be enough to attract Cadbury shareholders. If you are a shareholder in a high growth, high margin confectionery company, you don’t necessarily want to hold shares of a mature packaged food company.”

MATT ARNOLD, ANALYST, EDWARD JONES

“There’s a good chance they (Kraft) will have to increase this a little bit.

“I still think the cash side is likely where they have the opportunity to make it more attractive to Cadbury shareholders.”

STEPHEN POPE, CHIEF MARKET STRATEGIST, CANTOR FITZGERALD

“They (Kraft) are looking to try to play a slightly long game, i.e. being cool and not necessarily rushing in and fearing that they would overpaid.

“The worry is though that Cadbury would have run in to the Christmas season, which is usually very good for them. If they have their next trading statement and things are looking positive, then you will have a situation where the Cadbury price might have moved away again from where Kraft are trying to pitch this.”

CLIVE BLACK, HEAD OF RESEARCH AT SHORE CAPITAL

“It’s no surprise Kraft came back with a formal bid. There is a view that Kraft should have played a longer ball game. No white knight was found and there were no counter bidders so there was no reason for Kraft to increase their offer.

“Undoubtedly Cadbury will reject the bid but it will give shareholders something to think about. The process will be drawn out and they will come back with a higher offer, although not as high as some are speculating about.”

MANOJ LADWA, SENIOR TRADER AT ETX CAPITAL

“I can’t see Cadbury going for this. At the end of the day Kraft shares have declined hence the lower bid price - the previous price was around about 720.”

“As far as I’m aware there’s no one else waiting in the wings as well so Kraft is most likely going to have to come back in six months’ time.”

UNNAMED INVESTMENT BANKER

“It’s interesting Kraft came out in early New York trading. They clearly want to give themselves time to talk to their own shareholders. This is the start of a long process.”

(Compiled by Paul Hoskins)

Reporting by Reuters teams in London and New York

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