Today the Kraft CEO Irene Rosenfeld refused to raise the $ 16.4 billion bar for their offer of Cadbury, as the latest releases showed. Instead, they preffered to go with the offer directly to the shareholders.
Why is this called a “hostile bid”? Well, it is easy – the hostile bid, by definition, goes around the existing board of directors (i.e. without their official approval) and tempts the shareholders directly.
The North American food giant Kraft simply shelved the cash and shares terms of its original approach, which Cadbury rejected two months ago. Thus it started a bid battle that could (based on past experiences of other ig takeovers) last up to three months.
Having already rejected the same informal offer two months ago, Cadbury took little time again in rejecting the formal bid, or “derisory offer,” as chairman Roger Carr named it.
Usually the big companies have lots of tactics in their hands to fight against hostile takeovers. The Cadbury board of directors will almost certainly loose their jobs if the hostile bid goes ahead, since they will not be spared for fighting against it. Therefore, they will leave no stone unturned to make sure that the bid slows down to a halt.
What does this mean for the common investor? If you have already pruchased shares from Cadbury, their price will almost certainly go up. If not, maybe you should hurry. If the bid goes well, the price might go up further then it did today on the break of the announcement. Of course, there is always a risk that the shares drop for various reasons – e.g. a valuation showing that they are not so much worth etc. As with any investment, there is a risk… But what interesting times for Cadbury and Kraft, right?