Tuesday, 19 January 2010

Did Cadbury get a good deal?


Cadbury has been sold to Kraft foods today. No doubt there will be plenty of harumphing about another UK company being sold abroad. People seem to forge the effect is a net inflow of money in the UK, to staff, to banks, to pension funds; all of which can be re-invested in new companies.

Anyway, of more import that peoples' lack of understand about basic economics, is whether said shareholders have got a good deal. The best way of checking this is to understand how aligned the CEO's pay and mentaility is with a company. In Cadbury's case, Todd Stitzer is a lifer a the company, which would suggest he would not sell-out easily. he also get up to £448,000 in pay in share options and has done for many years. Big personal shareholders are good for a company when it comes to selling out, as they want the best price too.

On the downside, Todd is not a mega-shareholder as the Cadbury paid a huge bonus rather than more shares most year - Over £2 million.

I will leave the technical analysis of discounted cash flows etc to FT Alphaville. On balance it looks like the CEO was motivated to get a very good deal, Kraft reluctantly had to up their offer by 9%;  it seems like the first piece of M&A for 2010 has ended well for UK shareholders. That bodes well for 2010.

14 comments:

Nick Drew said...

too much to hope for that Mandy gets one in the eye ?

roym said...

well as one of the harumphers, i take your point and i hope that much of this windfall finds its way into AIM stocks!

i still have to point out that it took cadbury 200 years to get to this point, wheres the next one going to come from?

Sebastian Weetabix said...

And when the jobs all go offshore is there still a net benefit to the UK? I am unpersuaded that allowing all large UK companies to be foreign owned is beneficial. In difficult times when businesses need to make cuts, they circle the wagons & chop off the distant operations. That "rational" process amazingly tends to have inverse relationship to dstance from the senior manager's house.

roym said...

too true SW,
look at Terrys chocs. the plant in york was closed down by kraft and the jobs disappeared to Poland.

Steven_L said...

Be a good deal if you'd bought them for a fiver a few months back! Not that I did :(

El-Kevo said...
This comment has been removed by the author.
El-Kevo said...

It's no doubt good for individuals but is it good for Britain ?

One can be nerdy about economic formulae and balanced books - or even short term profit. Like selling off a piece of treasured art it marks decline and not progress of our society.

"i still have to point out that it took cadbury 200 years to get to this point, wheres the next one going to come from?"

Hear hear !

CityUnslicker said...

I can't answer the 200 years question; ask me in 200 years. Who knew Cadbury would be so successful 200 years ago?

They key is to have an economy that can generate lots of new companies that can compete internationally...

roym said...

well right now the paucity of credit makes it harder for companies to reach the end of the year let alone abroad.

and shouldnt our idiotic govt ensure a level playing field before allowing all and sundry to buy into whatever they want

El-Kevo said...
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El-Kevo said...

"They key is to have an economy that can generate lots of new companies that can compete internationally..."

Is that what selling Cadburys achieves then ?

To tell you the truth it feels like our country is being asset stripped.

We are the only place exporting jobs whilst importing people.

Laban said...

"the effect is a net inflow of money in the UK, to staff, to banks, to pension funds; all of which can be re-invested in new companies"

Hang on. Aren't a majority of the shares held overseas anyway ?

And any money that comes to the UK is more likely to be invested in land, property and (if they have any sense) shares with exposure to anywhere but the UK - I'd suggest Norway and Oz to start.

All through the 80s/90s/00s I kept hearing how trickle down would work, as yacht manufacturers expanded on the Hamble and slate shower cubicles were produced in Bethesda to feed the expenditure of the new rich. But what actually happened was that property prices soared. Assets were the thing.

Sir, I don't see these new companies.

Laban said...

CU - "The key is to have an economy that can generate lots of new companies that can compete internationally..."

I don't see any such companies being generated. Am I not looking in the right places ?

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