Blog: Dean BestAll eyes on Illinois

Dean Best | 9 November 2009

Welcome to the eleventh hour. At some point before 5pm today (9 November) US food giant Kraft Foods must either formalise its takeover bid for UK confectioner Cadbury or walk away from the proposal for at least six months.

News of the deal - and the increasingly antagonistic battle of words between the two food powerhouses - has dominated our headlines for some time. But last week, the tension was palpable as Kraft delivered what many commentators viewed as a pivotal trading update.

And while the world's second-largest food group hoped a better-than-expected jump in comparable profits and better margins would impress, the focus remained firmly on Kraft's lacklustre top-line, which was dented by lower pricing and poor volumes.

Kraft's poor sales performance will have done little to prove the value of Kraft's shares, which will partially fund the deal, or dispel Cadbury chairman Roger Carr's criticism of Kraft's "low growth model".

Although there has been mounting speculation that Kraft will back away from the deal - possibly returning in a year with a fresh proposal - reports in the UK's Sunday papers suggested that the Oreo-to-Dairylea maker would plough ahead regardless, turning its GBP10.2bn (US$16.7bn) plan into a hostile bid.

With the possibility that Kraft could increase the cash component of its offer, the question would then become whether Cadbury investors shared managements view that such a price "materially undervalues" the company and its prospects. Either way, the market is waiting with baited breath for an announcement out of Illinois.

In other news last week, we learnt that Dutch retail giant Ahold is positioning itself for expansion - both organic and acquisitive - by reorganising its operations in the US and Europe.

The company told just-food that the move would see it streamline and simplify its business, particularly in the US where it will combine the logistical operations of its four banners.

The move prompted speculation on the Continent that the Netherlands-based retail giant could be preparing a foray into Belgium and Germany.

While the company declined to confirm the rumours, a spokesperson told us: "We're keen to expand in new and existing markets and we've always said that we would look first at the adjacent market areas to the areas that we are present already."

We could well expect some exciting announcements from Amsterdam in the months to come.


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