As appetising as a lump of processed cheese was how some Cadbury shareholders dismissed Kraft’s informal offer two months ago. Yesterday, the real food arrived and it turned out to be the same lump of cheese, just a bit smaller.
Irene Rosenfeld could easily have justified adding another slice, if only to offset the fall in Kraft’s share price and in the dollar since she made the first approach. Arguably, Cadbury’s value has also increased a bit, due to the better than expected results it announced last month.
But the Kraft boss clearly decided there was nothing to be gained from such a gesture. And she was probably right. She wants to appear tough, disciplined and patient. She risked irritating Cadbury shareholders and giving the impression that she was trying to buy the company on the cheap. But the tactics appear to be working pretty well so far.
Estimates of the price she will be prepared to pay have been coming down, as has the price Cadbury’s shareholders say they would be prepared to accept.
There is still a fair gap between the two, however. Many Cadbury shareholders insist they will not sell out for anything less than £8, compared with an offer worth about 710p. By describing the offer as derisory, Roger Carr, Cadbury’s chairman, is signalling that it needs to be well north of £8.
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His job now is to stiffen investors’ resolve and convince the market that the company is worth more, both to Kraft and as a standalone entity.
This is likely to mean a focus on further improvements in Cadbury’s own performance, rather than deals that might make it too rich for Kraft to swallow. But Mr Carr is clearly determined to prevent Cadbury being stolen one way or another.
The Kraft camp has made much of the pressure on Ms Rosenfeld to be disciplined, not least from her big shareholder, Warren Buffett. But then, last week’s $34 billion bid for Burlington shows he is prepared to pay up for a prize asset.
It is hard to believe Ms Rosenfeld would have started a hostile bid battle without a little something in reserve. Cadbury shareholders should not expect to see it soon, though. She will take her time, hoping Cadbury trips up, her shares strengthen or the dollar recovers. This war will not be over by Christmas.