Reading between the lines: What the Kraft-Cadbury takeover bid says about the markets at large
Nov 11th, 2009 | By John Stepek | Category: Featured, Financial NewsJohn Stepek (Money Week UK):
Deal making is back!
That was the general reaction from the press when US food giant Kraft launched its first bid for British confectioner Cadbury less than two months ago. Pundits spewed out potential target prices like bingo numbers – £8, no £10, no £12! – and analysts scribbled out scenarios involving white knights and rival bidders from across the globe.
Reality has been a little more disappointing. Despite attempts to talk up the deal, no rival bidders have come forth. And yesterday Kraft came back to the table with an offer that can only be described as – as Cadbury’s board put it – ‘derisory’.
It’s just another sign that there’s a vast gap between conditions in the financial world and those in the ‘real’ world…
Market hopes are stretched far beyond reality
The Cadbury / Kraft bid saga shows just how far market hopes are stretched beyond reality.
Right up to yesterday’s bid deadline, analysts and investors were clearly expecting Kraft to pull some rabbit out of the hat that would give them an excuse to drive the confectioner’s share price higher from its already optimistic level of around 760p.
Instead, Kraft came back with an offer that suggested that, frankly, they can take Cadbury or leave it. The bid terms were exactly the same, which – because Kraft’s share price has fallen since the original bid was made – meant that the actual per share value had fallen, from the equivalent of 745p to 717p.
Yet, the Cadbury share price is still hovering pretty much exactly where it was yesterday. You can read more about the background to the story, and what we reckon Cadbury shareholders should do now, in my colleague David Stevenson’s blog on the topic.
What’s perhaps more interesting about this bid battle is what it says about the bigger picture and the market’s psychology right now. When this deal was first announced, the excitement in the City pages was palpable. This was the return of big deals, a sign that the recovery was on track.
Click here to finish this article at Money Week UK.
Advertisement
$592 Trillion Phantom Economy Blows as Latest Demon Derivative Unwinds
The worst demon derivative to date is about to whip down Wall Street...leveling what little is left! Over 700 banks (with trillions of dollars in assets) will come crashing to the ground. Hundreds of hedge funds will collapse. Corporate bankruptcies will soar. And another $20 trillion will be wiped off global stock markets. But this one bombed out investment will soar two to ten fold as the world comes undone.
Find out the entire story from the investment group who eerily predicted the current crisis "to a T!"...
Click here now and find out how to get started...
John Stepek is Deputy Editor of the UK-based financial weekly MoneyWeek. He is also the editor of daily investment email Money Morning UK. John graduated from Strathclyde University in 1996. He has worked for a number of financial magazines and newsletters including Families in Business, Shares Magazine and The Sunday Times.