DealZone

The derision thing

November 9, 2009

Derisory (di-ry-ser-i) adj. deserving derision; too insignificant for serious consideration.

In lambasting a formal takeover offer from Kraft as “derisory”, Cadbury Chairman Roger Carr has both ratcheted up the rhetoric (an earlier letter to Kraft did not use this term) and struck a tone familiar to connoisseurs of bid battles. Carr, of course, is a veteran dealmaker himself.

UK targets have often found rejecting an approach as “derisory” is just scornful enough, without incurring the wrath of the Takeover Panel. Other approaches to have met with the same brushoff include Macquarie’s 2005 hostile bid for the London Stock Exchange and BHP Billiton’s epic tilt at rival miner Rio Tinto.  Over in Ireland, Aer Lingus has decried the advances of budget archrival Ryanair in exactly the same manner.

Still, a bit of bluster doesn’t mean a deal can’t eventually be done at whatever the opposite of a “derisory” price is. WPP, for example, eventually won over market researcher TNS, and brewer Scottish & Newcastle finally melted into the arms of Heineken and Carlsberg.

Kraft’s offer is actually worth less than an initial informal approach because its stock has fallen in the meantime. Monday’s move certainly hasn’t impressed Reuters columnist Neil Collins, who says Kraft CEO Irene Rosenfeld has “pressed the snooze button”.

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