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Text size [+][-]  Friday March 12 2010GLOBAL EDITION

Considered view
08 Sep 2009 19:56

Not too sweet

RUN THE NUMBERS
 

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Kraft Foods, the world’s second-largest food producer, published details of a proposed £10.2bn cash and shares takeover of Cadbury, its UK rival.

The proposal, which does not constitute a formal offer, was 300p in cash plus 0.2589 new Kraft shares for each Cadbury share, totalling 745p at the September 4 closing price and assuming a 1.635 $/£ exchange rate.

Cadbury rejected the unsolicited proposal saying it “fundamentally undervalues the group and its prospects”.

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If the food giant wants to avoid sacrificing value for growth, it should resist paying a premium greater than the value of synergies. Based on similar deals, Kraft can squeeze out over $625m of annual costs. But that still only justifies a slight bump from what’s on the table.

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