Tasty Cadbury

21 October 2009

Todays figures released by Cadbury Plc, showed their bullishness (7% growth in revenue), but it is likely that this is just a ploy to get the best possible price from Kraft (hopefully over £8). They also indicate that growth for 2010 and 2011 will be at least 5%, and that margins are improving.

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Cazenove indicates: We are not surprised that Kraft has waited to see Cadbury’s Q3 trading announcement before it puts forward a firm offer. Further, we believe Kraft could use its own Q3 results announcement (3 November) to reiterate its investment case in Kraft and the strategic rationale behind its proposal to acquire Cadbury: firstly, recapping that Kraft has delivered its three-year plan of organisational change, portfolio rationalisation, improved execution in the marketplace, and cost reduction; and secondly, highlighting the rationale behind the proposal to acquire Cadbury including its exposure to emerging markets, access to instant consumption channels, and the potential for revenue and cost synergies.

Originally Roger Carr, the chairman of Cadbury's (and also Centrica) was Williams' chief executive and then chairman of the de-merged Chub which was taken over. He is also an adviser to KKR the private equity group which has been known to take over and re-organise company's so he will be well positioned to get the best value from Kraft, he stated, “The strength of our operating performance continues to underpin the Board's confidence in both our growth prospects and the potential for creating further, material shareholder value as a pure play standalone confectionery business".

I've said before, "In the bring-and-buy sale of British business everything must go." Whilst Cadbury could carry on as a stand alone business, I sincerely believe that these figures are likely to be the last before succumbing to Kraft.

Remember as 2008 has shown, shares and other financial assets can go up and down at frightening speed. Don't buy any, unless you know what you are doing and can afford to lose the money.