The Great Debate UK
from Breakingviews:
Kraft’s wait for Cadbury helps square debt circle
Sometimes the wait can be worth it. Kraft’s sweetened offer for Cadbury followed four months of drooling over the British chocolatier that must have seemed like four years for Irene Rosenfeld, Kraft’s chief executive. But the delay had its benefits. Though the cheese and crackers conglomerate will have to raise more money to fund the final deal, that's become easier and cheaper since Kraft launched its bid.
Kraft’s offer, now agreed by Cadbury’s board, promises a cash component of 500 pence per Cadbury share. That’s a 66 percent increase over the cash part of the lower and more stock-heavy proposal in September. Kraft’s sale of its pizza business to Nestle earlier this month will fund roughly 60 pence of that. Given Kraft’s modest cash holdings, the rest will have to be funded largely with debt -- potentially some $10 billion of it.
In November, Kraft received commitments for 5.5 billion pounds ($9 billion) of funding from a cluster of banks including Citigroup, Deutsche Bank and HSBC. That’s still available and along with a separate revolving facility gives Kraft the borrowing capacity it needs. The downside is that the banks are only offering bridge financing that has to be replaced within a year.
Happily for Ms. Rosenfeld, the delay in snagging Cadbury has allowed conditions in the investment-grade corporate bond market to improve. Now, Kraft should have little trouble refinancing these bridge loans in the United States or Europe -- and more cheaply than it could have hoped back in September. The average risk premium on better-rated corporate debt has dropped to 1.65 percentage points over Treasury yields, from 2.32 percentage points in early September, according to Barclays Capital.
from Funds Hub:
Short-sellers back in the money for now
For better or worse, hedge fund returns have a tendency to follow markets, in part because most long-short funds are net long most of the time.
So after a huge rebound in the stockmarket this year, which has helped hedge funds make up some much-needed ground, October proved a difficult month when the market fell in the second half of the month.
from Commentaries:
Cadbury’s share price says it’s stuck with Kraft
Here's a curiosity. Cadbury shares have not moved by more than 10p away from 790 pence since the day after Kraft popped the question with its 10 billion pound cash and shares "proposal."
The falling Kraft share price cut the value from 745p to just under 730p, but the Cadbury price has stuck like gum to a shoe. After the spike on the September 7 approach, trading volumes are almost back down to pre-bid levels. The usual suspects among the arbs don't seem interested. Could this be the bid that died of boredom?
from Commentaries:
Chocs away! Cadbury’s snack will be terribly expensive
It's been a long, long wait for the shareholders in Cadbury. For a profitless decade since the (adjusted) price first hit six pounds, they have been hoping for someone to come along and take their sweets away on the sort of terms they saw being offered to others.
Now the boys (and girl) from Kraft have decided that putting cheese slices together with Dairy Milk chocolate presents an irresistible opportunity. Cadbury had slimmed down by demerging Dr Pepper, its also-ran US soft drinks business. Investors had heard Todd Stitzer, the chief executive, say he wanted to be a consolidator in FMCG, rather than get eaten, and they had decided that he might be right. There was little in Friday night's price of 568p for a possible takeover.
