Blog: Dean BestCadbury whispers stir up storm

Dean Best | 23 September 2009

There was a whirlwind of activity this morning (23 September) as a Merrill Lynch note made headlines when it seemed to imply that Cadbury boss Todd Stitzer had placed a price on the UK confectioner of 900 pence per share.

Ever since Kraft signalled its desire to acquire Cadbury, the tit-for-tat battle between the food giants has – unsurprisingly - generated considerable interest in the business pages on both sides of the Atlantic.

Kraft has insisted that its offer of 718 pence per share is a good one, while Cadbury maintains that it “significantly undervalues” the group and its potential for future growth.

The argument took a new turn this morning, when Merrill Lynch sales specialist Simon Archer wrote: "On price, Todd seemed to admit that a 15x EBITDA multiple would be a fair price.”

The investor note, which was picked up by Reuters, sparked speculation that a deal was perhaps more likely than previously thought, with Cadbury's tone softening.

According to reports, Stitzer also told investors that he did not see Kraft walking away without completing the acquisition. Quite a change of tone from Cadbury chairman Roger Carr's stinging attack on Kraft's underwhelming performance and low growth rate.

The reports also raised eyebrows for another reason. If Stitzer's comments – or, rather, the media's interpretation of them – had been made in the middle of an offer period it would have represented a serious breach of M&A rules.

But no. This afternoon, Archer had this to say: “In my reference to a 15x EBITDA multiple, it is worth noting that Todd's comments were only in the context of comparable transactions being in the mid-teens - he was not implying a fair value for the business.”

As for Cadbury and Kraft? They are both sticking to their official lines – Kraft is still maintaining that its proposal – though not an official offer yet – is decent and Cadbury still claims that it undervalues the company.

Nevertheless, after today's shenanigans, one is left with the distinct impression that Kraft's takeover could well end favourably for the world's second-largest food maker. 

Katy Humphries, Deputy Editor


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