DealZone

Monday’s highlights:

London-based oil explorer Tullow Oil (TLW.L) exercises a right to buy Ugandan oil fields which its partner in the fields, Heritage Oil (HOIL.L), previously agreed to sell to Italy’s Eni (ENI.MI) for $1.5 billion.

Some of Cadbury’s (CBRY.L) biggest shareholders, led by Legal & General, continued to reject Kraft Foods’ 10.5 billion pound ($17.2 billion) bid and will look for an increased offer.

Brazil’s Camargo Correa Group reiterates its interest in cement maker Cimpor and says it is pondering its options after the Portuguese stock market regulator turned down its merger proposal.

Dutch sports car maker Spyker denies it has plans to bid jointly for General Motors’ Saab with Luxembourg investment firm Genii Capital.

For more on these and the rest of the latest deal-related news from Reuters, click here.

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.

Hershey is still working on a bid for Cadbury that would top Kraft’s 10.5 billion pound bid for the British confectioner. As the clock ticks down for rivals to enter the fray, Hershey — the one remaining party to declare its hand — has still not decided if it will table a formal offer, but has authorized the drawing up of a bid. At the same, Kraft has stepped up the charm offensive with Chief Executive Irene Rosenfeld visiting Cadbury shareholders in London. She has found some doors shut, however, indicating that investors find the bid too low.

First round bids for debt-ridden film studio MGM are due on Friday, with 12 companies having expressed an interest in the business, including rivals Time Warner and Lions Gate Entertainment, as well as Liberty Media, News Corp and private equity firms. Non-binding bids for the studio, controlled by a consortium of private equity and media firms, are expected to come in at $1.5 billion to $2 billion, way below $3.7 billion it owes its lenders.

Telecoms billionaire Carlos Slim has launched a $21 billion bid to unite Telmex and Telmex Internacional with Latin America’s top mobile phone provider America Movil. Slim, who controls all three companies, wants to create a leading fixed-line, mobile and internet services company to stave off competition from rivals.

The pursuit of Cadbury is rapidly becoming a one horse race after Italy’s Ferrero ruled itself out of the fight and cut off talks with potential bid partner Hershey, leaving only the U.S. chocolate maker to declare its hand in the battle for the British confectioner. Cadbury, meanwhile, yesterday put the finishing touches to its defence against U.S. food giant Kraft’s 10.5 billion pound hostile bid by promising an improved performance and a raised dividend.

Luxembourg-based investment firm Genii Capital intends to improve its bid for Swedish carmaker Saab in order to catch the eye of seller General Motors. Bids from Genii, which is working with Formula One supremo Bernie Ecclestone, and Dutch carmaker Spyker have failed to prevent GM from appointing advisers to oversee the wind-up of the business.

India telecoms group Bharti Airtel has created a new unit to pursue emerging markets acquisitions after failing to reach a deal with South Africa’s MTN last year.

Cadbury posts its final defence against Kraft’s hostile takeover, but a muted share price reaction shows it is not changing market views about the deal much.  Ferrero, the Italian chocolate maker, is “very close” to taking a decision on whether to launch a counterbid together with U.S. group Hershey, a source close to the operation tells Reuters. Italy’s Il Messagero reported earlier Ferrero was securing a $4.5 billion syndicated loan.

General Motors repeats it is closing down Saab, because it has not yet received a credible bid. Dutch group Spyker meanwhile, says it remains hopeful that a deal can be reached.

And in other media:

Ford remains open to talks with potential bidders for its Volvo cars unit, despite a commercial agreement on a sale with China’s Zhejiang Geely, Sweden’s Dagens Industri says.

Whatever his motives, Warren Buffett’s influence can be seen in Cadbury’s share price, which have dipped below the level of Kraft’s $17 billion bid for the first time. The sagging share price shows, among other things, that the market believes Kraft is more likely to make its 50.1 percent acceptance rate without having to aggressively raise its bid.

Analysts still see Kraft having to sweeten the deal, but not as much as they had previously suggested. Also weighing on Cadbury’s stock is the cold water splashing over prospects for a rival bid from Hershey. Cadbury said it was not looking for a white knight bidder and analysts are not convinced Hershey can finance a takeover.

Hershey may not be able to pull off a deal on its own as a white knight, but that doesn’t completely rule out it taking a significant stake in Cadbury. If other big strategic investors were so inclined, and could perhaps tempt some interest from private equity, they could well put together a bloc to scuttle Kraft’s efforts. It might not even take much effort, given the loud, angry way Buffett – Kraft’s biggest share holder — slammed the door on raising the bid.

A negligible 1.5 percent of Cadbury (CBRY.L) shareholders have tendered their stock to Kraft (KFT.N) at the first deadline — as expected, most are waiting for a higher offer from the U.S. food group. Billionaire Warren Buffett gave Kraft an embarrassing slap on the wrist on Tuesday, warning it not to overpay for the British confectioner. His words caused a steep drop in Cadbury shares, as markets discount a smaller chance of the bid succeeding. But then again, Kraft raised the cash component of its offer, while possible rival bidder Nestle (NESN.VX) bowed out of the race.

Singapore’s third-largest lender United Overseas Bank (UOBH.SI) will sell ifs Singapore life unit to Britain’s Prudential (PRU.L) for around $310 million.

And in other media:

An unnamed Russian group is close to buying control of one of Ukraine’s largest steel groups, Industrial Union of Donbass, the Financial Times says.

For an M&A story you can’t get much better than today’s Kraft/Cadbury/Nestle/Buffett mash-up.  Kraft said it would give detailed terms of its alternative cash offer by January 19, stay tuned. Here is a breakdown of the deal:

Reuters wrap up:  Buffett threatens Kraft’s Cadbury bid Factbox: How the new offer works Scenarios: Kraft sweetens Cadbury bid Timeline: Kraft bid timetable ticks away for Cadbury Berkshire Hathaway news release on Kraft’s bid (Berkshire Hathaway)

What is Buffett up to?

Warren Buffett’s M&A 101 Lesson for Kraft (WSJ) Warren Buffett’s public attack on Kraft is out of character (Guardian) What Buffett’s Vote Means for Kraft’s Cadbury Bid (WSJ) Breaking down the press release (The Rational Walk)

Kraft:

(Acquisitions Monthly) Nestle’s neat moves over the New Year put it in pole position to help carve up Cadbury. The Swiss company’s decision to exercise its US$28.1bn option to sell its remaining Alcon shares to Novartis gives it the firepower to control the fate of the British confectioner.

Nestle’s strong balance sheet, enhanced further by the Alcon agreement, has made it the one obvious alternative bidder to Kraft for Cadbury. The latter is now worth just US$17bn after today’s 3% fall to 778.5p. However, Nestle has done a superb job at putting the market off the scent.

Rationally, the group’s position as the second largest UK chocolate producer should rule it out from making a bid. That is still the case. As Nestle stated this morning, “it does not intend to make, or participate in, a formal offer for Cadbury”.

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.