Global Investing

Kraft was always expected to raise its bid for Cadbury, even with no real rival to its initial overture and grumblings from top shareholder Warren Buffett about Kraft possibly overpaying with its stock. The only question was how much. But if it did overpay, it did so with credit. Just in case shareholders were thinking of making a stink, CEO Irene Rosenfeld ratcheted up the cash component to a level that negates the need for shareholder approval.

Dealmakers said the agreement was struck after all-night negotiations in London. It values Cadbury at 840 pence per share. Shareholders will also get a special dividend of 10p per share, bringing the total to 850p per share. That far exceeds scaled-back expectations and was a big jump from the sub-800p levels that had so soured earlier negotiations.

With growing expectations that Hershey would muster a bid around these levels, and all of those high-brow British M&A deadlines clicking into place, getting a friendly agreement had gained urgency going into the weekend. While pundits' palates (beyond those of fondue-chomping Europhiles, if you keep an ear on CNBC) may rebel at the swirling of chocolate and cheese, Rosenfeld has for at least a day gone from looking outflanked by both her own shareholders and grumpy Cadbury executives to a box of chocolate roses.

The proof will be in the pudding. The question of digestion has yet to be answered. The new deal increased Kraft's annual cost savings target to at least $675 million by year three, up from $625 million. Though it made no mention of possible job losses among Cadbury's 46,000-strong global workforce, the deal has gone from "derisory," as Cadbury initially called it, to delicious quickly enough to wonder why Kraft took so long to close it.

While Cadbury shares saw some life on hopes for a rival bid from Hershey -- boosted by reporting from the FT that a rival offer was further along than much of the market had assumed -- naysaying analysts and pundits have been quick to point out that the financials of a Hershey bid are hard to stomach.

Hershey is only half the size of Cadbury, and a big share issue would dilute the stake of the controlling Hershey Trust, which has been every bit as crucial to defining the company as the kiss. The FT report says Hershey is working on a private equity element with none other than Byron Trott, Warren Buffett's banker of choice. The idea that Buffett, who is Kraft's biggest shareholder, could play both sides of a bidding war is, if not new, certainly intriguing, particularly given his apparent distaste for Kraft selling its own shares to keep its bid attractive.

And while Cadbury has repeatedly denied it is looking for a white knight, a deal that would leave its management in place, perhaps in exchange for keeping the Hershey Trust intact, could be attractive enough to consider breaking off a piece of Cadbury to give to a private equity investor to chew on ... its gum business, for example.

Warren Buffett may have thrown a monkey wrench into Kraft's bid for Cadbury -- not with his 'no' vote on Kraft's plan to issue 370 million shares to help buy the British chocolate company, but with his scathing comments on Kraft's board for a deal he has long regarded with skepticism. Buffett previously said Kraft's stock was an "expensive currency" for funding the deal, a position he repeated on Tuesday.

Kraft's proposed share issue would give it a "blank check," allowing it to change its offer for Cadbury, Buffett's insurance and investment company Berkshire Hathaway said in a statement. "And we worry very much that, indeed, there will be an additional change from the revision announced this morning."

The statement came hard on the heels of a slight sweetening by Kraft of its $16.4 billion offer for Cadbury. The overall figure is the same, but the cash portion is a bit bigger. Perhaps more telling, it also followed a statement from Nestle shooting down speculation that the world's biggest food group had any interest in getting involved in the Cadbury deal.

Warren Buffett is in talks to buy GMAC's mortgage lender Residential Capital, the New York Post reports. Teamed up with Appaloosa Management and Avenue Capital, Buffett has large debt positions in the gut-shot company, according to the Post. In September, Buffett's Berkshire Hathaway and Leucadia National agreed to buy Capmark Financial Group's mortgage loan and servicing business for up to $490 million.

If the residential property market hasn't begun a solid recovery, it certainly established a solid bottom over the past six months. New home sales figures out yesterday were shockingly weak, but keep in mind that November and December are not particularly hot months for residential real estate, and new home sales are a much smaller chunk of the market than the existing portion. Lots of analysts were expecting the housing recovery to face a test as we get closer to the extended deadline in March for the $8,000 homebuyer tax credit.

But it's a rare investor who gets rich betting against Warren Buffett. And if he's looking to buy low, he could hardly have done better than ResCap. The lender has been flirting with dangerously low capital levels, with the Post reporting it is bouncing around the minimum required net worth of $250 million. It had a tangible net worth of $409 million at the end of the third quarter. The mortgage company has lost over $10 billion in the last three years. The number of loans delinquent rose to 13.40 percent at the end of June from 11.50 percent at the end of 2008.

InBev has timed its $46.3 billion bid for Budweiser brewer Anheuser-Busch well. Anheuser’s shares have gone nowhere for five years, Chief Executive August Busch IV is not the leader his father was, while InBev is buoyed by strong revenues from Brazil, where the real is riding high.

That probably explains the wall of silence from the Budweiser brewer’s home town of St Louis. What does it do to fight off the $65 a share bid — sack its chief executive, sell
off its non-core assets or look for a friendly white knight?

The Busch family has had influence over the group well beyond its small 3.5 percent stake. But with hard cash on the table, hedge funds moving in and investment guru Warren Buffett sitting on 5 percent, the family no longer pulls all the strings.