Kraft agrees with Cadbury for $19B

[omagh]

Kraft and Cadbury agreed to a deal late this afternoon.

http://dealbook.blogs.nytimes.com/2010/01/18/kraft-and-cadbury-near-a-friendly-deal/#more-167519

[Parsad]

They've overpaid by $3B!  They'll get their money back, but better returns could have been had elsewhere.  Cheers!

 

 

[Guest dealraker]

Parsad,

 

I respect writing and your opinion and I love this website.  I disagree on the CBY price.  Time will certainly tell (he he he) but I think Kraft did well and I think CBY will benefit from KFT's involvement.  I have owned CBY for 10 years, buying at a little below $24 and again when it briefly dropped below $20.  As I recall CBY dropped below $20 in the 2000 era (around then but I can't really remember) because investors were selling everything they owned to buy tech, including the braces off their children's teeth!

 

Ha!

 

Later.

[Guest dealraker]

Parsad,

 

Also I bought $340,000 of Kraft at $26.50 about a month ago so I'm not saying it was a good deal simply because I owned CBY.  I have seen a lot of food co mergers that do work and of couse and a believer this one will too.

 

deal

[Parsad]

Parsad,

 

I respect writing and your opinion and I love this website.  I disagree on the CBY price.  Time will certainly tell (he he he) but I think Kraft did well and I think CBY will benefit from KFT's involvement.  I have owned CBY for 10 years, buying at a little below $24 and again when it briefly dropped below $20.  As I recall CBY dropped below $20 in the 2000 era (around then but I can't really remember) because investors were selling everything they owned to buy tech, including the braces off their children's teeth!

 

Hi Dealraker,

 

The deal will work out fine for both parties, but Cadbury certainly got the better end of it.  I would not have paid that much, regardless of any sort of synergy the two CEO's think they will generate.  Cadbury earns about $800M annually...KFT paid almost 25 times earnings, and it's actually even worse because they used alot of undervalued KFT stock.  Cheers!

[Guest dealraker]

Cadbury will become immensely more profitable.  I have been somewhat jolted to see how little profit they make compared with others in the business.

[Rabbitisrich]

Buffett just gave an interview on Squawk Box where he said that he did not support the deal. He noted that Kraft sold their pizza business to Nestle for 9x pre-tax earnings, and that it did not make sense to purchase Cadbury at 13x EBITDA.