getting fresh: 'Say it ain't so, Roger'
Is the game really over? Well, unless Hershey gets on its horse and swoops in as white knight by this coming Monday, it appears that Kraft Food’s gambit has succeeded. Yesterday, Cadbury PLC’s board announced that it had unanimously endorsed Kraft’s new bid worth $19.5 billion, which upped the previous offer from $17.1 billion.
Although Hershey Foods has until Jan. 25 to counter, analysts seemed to think that the company has too many hurdles to jump to get into a bidding war. And it’s not just financing, either. Because the company is governed by a trust charged with managing the Milton Hershey School, investors aren’t keen on having their influence negated by a board who has other business interests on its mind.
Although the deal won’t be consummated until Cadbury stockholders vote to approve on Feb. 2., all signs point to this being a fait accompli, even with Warren Buffet’s latest comments against the acquisition.
So what happened to change Roger Carr’s mind to the point where he, in a joint statement with Kraft, said the new offer “represents good value for Cadbury shareholders”? After all, this is the man who called Kraft’s initial takeover offers “derisory.”
Unfortunately, Carr hasn’t shared his thoughts with me. All I can say is that Kraft certainly knew how to turn up the pressure, first selling off its pizza business to increase the cash value of the offer and then waiting patiently until Hershey revealed that it was preparing to make a bid for Cadbury before hauling out its trump card.
Obviously those events were only bit and parcel of Irene Rosenfeld’s strategy. Kraft’s chairperson personally staked her reputation on this takeover bid, visiting large Cadbury shareholders in London last week to gain, if not their acceptance, certainly their point of view on what it would take to get the deal done.
I suspect Carr knew the tide had turned after Kraft upped its bid, dangling the 13x earnings bid price amongst Cadbury’s major shareholders. “Resistance is futile” could have been Rosenfeld’s mantra.
But as Jeremy Batsone-Carr, an analyst at Charles Stanley & Co., said in a recent Associated Press article, “We have to admit surprise at how meekly Cadbury has apparently acquiesced.” That makes two of us, Batstone-Carr.
Perhaps Roger Carr and the board were tipped that there’s no way Hershey can make a bid. Perhaps it was the idea of creating the world’s largest confectionery company, one that will have 40 brands topping $100 million in annual sales each.
Was it the “highly complementary geographic footprint” or the capability of having the “leading positioning developing markets, including in Brazil, Russia, India, China and Mexico”?
I suppose there were probably a combination of factors as to why Carr and the board raised the white flag. Perhaps there was no way out. It will be interesting, however, to see the repercussions, especially when the “synergies” are fully introduced.
In the end, kudos to Irene. Looks like she’s going to get her candy company … and a damn good one at that.
As Tobymac croons in his “Irene” song, “Hush little baby don’t you cry, Daddy’s gonna sing you a lullaby, Everything’s gonna be alright, The Lord’s gonna answer your prayer tonight.” Amen.
Cadbury accepts Kraft's latest offer
In the end, Irene Rosenfeld’s backed up her desire to acquire Cadbury PLC with something few shareholders could resist – more money. In upping the company’s bid for the British candy maker from $17.1 billion to $19.5 billion, Kraft Food’s chief executive made it difficult for management to say no.
On Tuesday, Chairman Roger Carr announced that Cadbury’s board had agreed to the revised bid, and in a joint statement, said the new offer “represents good value for Cadbury shareholders.”
Specifically, Kraft will pay 500 pence in cash and offer 0.1874 new Kraft shares for each share of Cadbury. The total compensation adds up to 840 pence, about $13.80 for each share. According to Kraft, the amount represents 13 times Cadbury’s earnings, with 60% being in cash and the remainder in company shares.
If approved by Cadbury shareholders – the deadline is Feb. 2 – the merger would create a global confectionery giant, making Kraft Foods the world leader in chocolate and sweets, and No. 2 in the gum market.
The acquisition will give Kraft “40 confectionery brands each with annual sales in excess of $100 million dollars.” It also delivers “a highly complementary geographic footprint” by capitalizing on each company’s strengths in high-growth developing markets such as Brazil, Russia, India, China and Mexico.
The move also will enhance Kraft’s access to “instant consumption channels,” that is convenience stores and gas marts, where Cadbury has a strong distribution network.
Noting that “confectionery markets are consolidating, and scale is becoming increasingly important,” Kraft sees the addition of Cadbury to its fold as critical to competing more effectively. During an early morning investor conference call yesterday, Rosenfeld emphasized that the impending acquisition “is about growth” and that Kraft would increase “investment in Cadbury’s iconic brands.”
Citing the success of past previous acquisitions, going back to Nabisco in 2000 and most recently Groupe Danone’s Lu biscuit business, Rosenfeld said the plan was to integrate “the best of both.” The aim is to create the “leading snack, confectionery and quick meals company.”
Rosenfeld also pointed out that Kraft expects to realize at least $675 million annually in cost savings as a result of “meaningful revenue synergies over time from investments in distribution, marketing and product development” by the end of the third year of the merger.
News of Cadbury’s decision to accept the offer was not well-received by the various unions representing the rank and file in the company. Citing a history of cost-cutting moves in the past as well as the debt load that Kraft will take on, the unions expressed concern that 30,000 jobs could be at risk.
In yesterday’s conference call, Kraft’s executives responded to such concerns by saying that Kraft would maintain a strong presence in Britain and be a “net importer” of jobs.
Although there’s still a possibility that The Hershey Co. could insert itself as a possible bidder – it has until Monday to do so – most analysts agree that the Pennsylvania-based chocolate and candy manufacturer faces too many obstacles to top Kraft’s current bid.
This morning, Warren Buffet, head of Berkshire Hathaway, an investor group that holds 9.4% of Kraft stock, called the merger a “bad deal” on CNBC, a cable business channel. Although Buffet indicated that he would hold onto Kraft stock, he questioned how the company would pay for the acquisition.
At yesterday’s investor call, Kraft indicated that it would pay down debt from increased revenues as a result of the merger.
For more information, visit www.kraftfoodscompany.com.
Bell Flavors names top trends
Honey, milk chocolate and rose are the leading flavors listed by Northbrook, Ill.-based Bell Flavors & Fragrances in the sweet flavors market category of its 2010 Top Ten Flavors by Category. Others listed under sweet flavors, which includes confectionery, bakery and dairy, are as follows: chocolate with bacon, Ellison orange apple, Golden Russet, Pomelo, Chili, Sea Buckthorn and Aronia. None of the aforementioned profiles appeared on 2009 Top Ten Flavors by Category, indicating that they are new trends for 2010.
According to Bell Flavors & Fragrances, the list was tabulated via three methods: by tracking samples requested over a 12-month period, through Trend Scouting performed by the company’s marketing and R&D departments from four continents, and by compiling flavor trends from external resources and suppliers such as Mintel, the media and other credible sources. The resulting Top Ten Flavors by Category is a result of compilation and analysis of all information.
In a release, Bell noted that “the flavor bacon will be on the top of all product development for 2010.”
Bell Flavors & Fragrances also offers 2010 Top Ten Fragrance Trends.
For more information, visit www.bellff.com.
Snackonomics Collect-And-Win Game 'chompensates' consumersHackettstown, N.J.-based Mars Chocolate North America has announced a new Snackonomics Collect-and-Win Game, offering 10,000 lucky real chocolate lovers a chance to win some “Chompensation” as part of its latestSNICKERSbrand campaign.
Through March 31, consumers can visitwww.snickers.com. and enter the Official Game Code located under the wrapper of specially markedSNICKERSproducts. Participants who enter will earn letters (A, C, K, N, O, P, S, T, Y or W) that can us used to spell one of four words on the Snackonomics game board. The letters consumers collect will spell one of four words that correspond with four distinct prizes.
“SNACKONOMICS” will earn the winner payment of the mortgage on their house, a $225,000 value. “CHOMPENSATION” will earn two winners work $50,000 in salary each for a year. “AUTOPAYNUT” will earn five winners car payments for $5,000 each for a year. “CHEWRENCY” will earn 10,000 winners freeSNICKERScandy bars.
“Often, consumers may be faced with financial challenges and will look at various ways to satisfy those needs,” says Debra Sandler, chief consumer officer, Mars Chocolate North America. “TheSNICKERSSnackonomics Collect-and-Win Game will not only satisfy people’s hunger, but also their bank accounts.”
For more information, visitwww.snickers.com.
Whole Foods, Nordstrom to sell organic Skinny Bars
The 100% Organic Skinny Bars line from Brattleboro, Vt.-based Tom and Sally's Handmade Chocolates, Inc. will be sold in the North East Region of Whole Foods Markets and Nordstrom Espresso Bars on a national level starting this month.
Tom and Sally's is working through Chex Finer Foods of Attleboro, Mass., to service the Whole Foods region, headquartered in New Jersey. Whole Foods will stock four of the line's 10 selections.
Each of Nordstrom’s Espresso Bars will work with Tom and Sally's directly and choose its preferred selection from the same line.
According to Tom and Sally's co-owner Sally Fegley, the bars have sold especially well in high-end gourmet and natural food stores as well as coffee bars. Akin's Natural Foods Market, Chamberlin's Market & Café and Barnie's Coffee & Tea Co., along with many smaller chains and independent retailers, have carried the line since its inception two years ago.
Tom & Sally’s 100% Organic Skinny Bars average about 200 calories each, are made from 100% organic Belgian chocolate and are vegan. The bars' merchandisers are just 2.5 in. wide, providing excellent use of shelf space.
For more information, visit www.tomandsallys.com.
Sweet of the week: Choward's Guava Tropical Candy
Choward’s Guava Tropical Candy from C. Howard Co., Inc., Bellport, N.Y., smells and tastes like the fresh flowered fruit for which it is named. The pocket-friendly confection is made in the United States from real sugar. The suggested retail price is $0.79 per 15-piece package.
For more information, visit www.chowardcompany.com or call 1-631-286-7940.