Kraft purchase of Cadbury a catalyst for area M&A

Kraft purchase of Cadbury a catalyst for area M&A

By Sherri Dauskurdas
Associate Editor

In a move that would make it the largest candy maker in the world, Northlake-based Kraft Foods, Inc. has worked a deal to purchase European candy company Cadbury PLC, to tap into the market share advantages in such emerging areas as India and Latin America.

Announced Jan. 20, the $19.5 billion buyout was accepted by Cadbury despite previous objections by a majority of the British company’s stakeholders. The buyout talks, which began in September 2009, culminated last month, fetching Cadbury a payoff nearly $3 billion higher than the first offer made by Kraft.

Kraft CEO Irene Rosenfeld said the purchase is the “next logical step in our transformation toward a high-growth, higher-margin company. It has the potential to benefit our brands, our employees, our consumers and certainly our shareholders.”

Cadbury is the world's second-largest confectionery company after Chicago native Mars-Wrigley, making brands such as Cadbury Dairy Milk chocolate, Trident gum and Halls cough drops. Cadbury has the No. 1 or No. 2 position in more than 20 of the world's 50 biggest confectionery markets, operates in more than 60 countries and employs more than 46,000 people.

Now Kraft will take top billing, ahead of its Chicago neighbor. And while those Cadbury crème eggs are all the rage at Easter, chewing gum is where Kraft officials hope must of the investment will stick.

That’s because chewing gum is a huge business. Dominated by Wrigley and Cadbury, it has seen a surge of growth, particularly in such emerging markets as India and Latin America, where Cadbury PLC holds an 81 percent share of the sugarless gum market. With Kraft’s takeover, the two largest producers of gum in the world will call the Chicago area home.

Craig Miller, CEO of ACG Chicago and an expert on mergers and company acquisitions, said that while he had no direct knowledge on the transaction, the general discussion seems to make sense.

“This will provide a great deal more market presence in India which is a large and, most likely, growing market as their economy continues to develop,” he said. “It shows a proactive global perspective that ACG Chicago has been heavily promoting for most of this decade for middle market firms.”

A deal such as this one could be just the boost needed for an M&A market that hopes to rebound in 2010.

“Of course funding in a struggling economy may take more effort, but most of us see this improving and transactions like this are executed for long-term strategic reasons, which will consider long-term trends more heavily.”

Posted on Wednesday, February 03, 2010 (Archive on Wednesday, February 10, 2010)
Posted by jstoltz Contributed by jstoltz

Return