The Renaissance Of M&A: Kraft (KFT) Bids For Cadbury
Kraft (KFT) has made a $16.7 billion bid for Cadbury. The offer is about 30% above Cadbury’s current price. Not surprisingly, the offer is based on due diligence and financing, which may give Cadbury’s board a way out. It may…
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The proposed transaction shows that several things have occurred in the last month that will revive the comatose M&A markets.
Kraft (KFT) clearly thinks it will have access to capital to close the transaction. Its market cap is $41 billion so a $17 billion deal will probably not be easy to digest. Kraft has less than $2 billion on its balance sheet and $18 billion in long-term debt. It must believe big financial firms have developed a new appetite for funding transactions which are large and somewhat risky.
The other reason that M&A may be experiencing a resurrection is that the recession has kept earnings at many companies low and their stock prices down. Cadbury still trades well under where it did a year ago. Kraft must believe that its can take out redundant expenses in a buyout and that Cadbury’s fortunes will improve with the economy. Given the leverage the deal might involve, that is quite a risk.
Douglas A. McIntyre
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Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.
McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.
His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.
A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.
TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.
McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.