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Kraft Foods (of macaroni and cheese fame) has been in hot pursuit of Cadbury (of creme egg fame). Today the American company made a hostile bid, repeating its $16.4 billion offer that was rejected two months ago. Cadbury turned up its nose immediately, calling the sum "derisory." Now Cadbury shareholders will have three months to take the deal, drive up the price, or walk. Most agree the U.S. food leviathan will have to raise its offer, but warn that it will be nowhere near the price Cadbury says its profitable, tooth-rotting empire of chocolate, soda and gum deserves.
So what's at stake? Cadbury's on a growth path, while Kraft's profits this quarter were less than stellar. But most pundits think the UK brand is bound to give in:
• Cadbury Shareholders Won't Refuse, says Evan Newmark at the Wall Street Journal. Newmark says that the idea that Cadbury is being offered less than its "true value" is absurd--and exactly the sort of reasoning the hurt Yahoo when it turned down Microsoft's bid. "The only 'value' that really matters is the price any investor is willing to pay for a Cadbury share. And as of today, that's 758 pence, a meager 6% higher than the value of the Kraft bid...In the Cadbury hostile takeover, it will come down to what Kraft and a few big Cadbury shareholders want. And it's hard to see either group wanting Cadbury to stay independent."