The U.S. power company Kraft Foods (KFT) (Oreo, Milka, Lu, Chips Ahoy etc. ..) today launched a takeover bid for Cadbury (CBRY) (manufacturer of chewing gum and chocolates possessing brands like Trident, Bubbaloo or Halls among others).
While a year ago, the entry in September, marked the demise of corporate transactions, it appears that this September we are starting to emerge with such force, especially in regard to acquisitions made by industrial enterprises with a powerful market position that exploit the situation to acquire rivals and strengthen their strategic positioning (the last was the acquisition of Marvel by Disney).
In this case the offer made by Kraft Foods has been at 745 pence per share from Cadbury, which is valuing the company at approximately 10,200 million British pounds. Kraft will pay 300 pence per share in cash and the rest offering 0.2589 shares of Kraft for each share of Cadbury (the offer part payment in shares seems to be one of the new guidelines in this post credit crunch).
The 745 pence a share offered by Kraft Foods, represented a premium of 31% over last quoted in Cadbury, the board of Britain has already announced that it has rejected the offer as insufficient, and action to overcome price OPA reaching beyond the barrier of 800 pence.
My supply seems pretty generous and fair with the times, and valuing Cadbury to multiples of almost 12x its expected EBITDA in 2009 and a PER of just over 20x. Figures pretty generous with the times and while Cadbury has a good market position in a business that is holding up pretty well recession, even grow, and where for sure there are synergies between the companies, it seems 12x Ebitda or gives me the feeling that this is a large multiple. Although much lower price to be paid for with Mars for Wrigley, which was 17 times its EBITDA.
Generally in the industry of jam in good times, have paid multiples of 14 to 15 times Ebitda, if Cadbury was finally assessed at 15 times its EBITDA, we could reach a price of about 960 pence, a premium additional 20% above the current price quote. The issue could be encouraged if Nestle and Hershey entered the bidding and choose to split the divisions of chocolates and gum Cardbury, given that I is an investment with currency risk, prefers to stay as I did with the offer of the cosmos to acquire National Express.