The low acceptance rate is a humiliation for Kraft which had its new offer for Cadbury rejected by the British company yesterday. Kraft shareholder Warren Buffett also said he would not back a plan for Kraft to issue new shares as part of the process to close a purchase of Cadbury.
The paltry 1.5% acceptance rate of the Kraft offer is the clearest sign yet that Kraft should quit while it is behind.
Takeovers, especially those that involve a long process, take managements away from their proper primary role of running their companies. Kraft has already sold one of its most profitable businesses, its North American pizza operation, to Nestle for $3.7 billion so that it can raise the cash part of its Cadbury offer. This means that Kraft’s margins are likely to fall.
Kraft has decided to continue its quest to buy Cadbury in the face of Buffett’s issues with the deal and another rejection from Cadbury’s board. Kraft’s shares rose yesterday when it became clear that its offer for Cadbury was less likely to succeed. That should be a signal to Kraft CEO Irene Rosenfeld that if she wants to keep her job she needs to go back to doing it.
Douglas A. McIntyre
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