Kraft, the giant US food company, finally made a hostile takeover for Cadbury just hours before the ‘put up or shut up’ deadline imposed by the Takeover Panel following thier initial approach in September.
The bid is on exactly the same terms as their indicative offer – 300p in cash and 0.2589 Kraft shares for each Cadbury share.
This is most likely the start of a long battle for ownership of Cadbury.
Kraft has yet to set out a strong business case for ownership of Cadbury, and for private shareholders the nature of this bid shows the risk involved in owning overseas stock.
Although the bid is on the same terms as announced in September, the bid is actually worth less to Cadbury shareholders.
Kraft’s share price has fallen, but the offer has also been negatively impacted by the continued fall of the US dollar.
The bid is now worth 717p a share, compared to 745p in September.
The issue of currency risk is often overlooked by private shareholders, but it can have a significant effect on the performance of your portfolio.
Shares that rise in nominal value can have those gains offset by fluctuations in currency markets. Private shareholders should consider their views on the both the outlook for the company and the currency.
Cadbury have rejected the offer, describing it as “derisory”, although the offer will be put to shareholders.
Private shareholders will have the opportunity to make their opinion count, although any decision will be effectively taken by institutional shareholders who wield the greatest voting power.