The Age Of Hostility

THE battle for Cadbury is already turning nasty. One week after Kraft, an American food conglomerate, made an unsolicited bid for it, the British confectioner hit back on September 12th. Roger Carr, Cadbury's chairman, wrote an open letter in which he described the bid as an "unappealing prospect" that would serve only to lock the chocolate-maker into Kraft's "low growth, conglomerate business". Kraft says it is pressing on regardless. It is expected to have to improve its terms to win over Cadbury's shareholders. Officially, Kraft's offer is friendly. Irene Rosenfeld, its chief executive, says she looks forward to "constructive dialogue" with Cadbury. But in reality the moment Kraft made public its rejected offer, the bid became hostile. In this respect, it may mark the start of a trend.

Kraft's offer for Cadbury is one of several recent signs that life is returning to the mergers and acquisitions (M&A) business. Executives and investment bankers have returned from their summer holidays in better spirits, confident that even if recovery may be slow the worst is over for the economy and that credit is becoming available. Share prices, though off their lows, look cheap by historic standards. These are ideal conditions for a new merger wave to form.