CORPORATE FINANCE

Corporate Finance

Merger & Acquisition

Introduction

From the perspective of the acquiring firm in M&A, the objective of the transaction is to generate wealth by obtaining some valuable strategic benefits under control of the target firm. Acquiring firm managers often mention strategic benefits such as synergies, strengthened competitive position, increased economies of scale, and access to international markets when describing the reasons behind their deals. Like any investment, with reward also comes risk. It looks at the various benefits and challenges that the company is set to face after it has acquired the British chocolate maker Cadbury.

Kraft & Cadbury

Kraft Foods launched a buyout for Cadbury with the recommendation of the board of British chocolate for about 11.900 million pounds (19.600 million). The transaction created the largest group of candy after frantic negotiations. The U.S. giant food offered more cash to unlock a stalemate that had lasted four months. The cash and stock offer valued Kraft each Cadbury shares at 840 pence, with a special dividend to shareholders of 10 pence, leaving the total at 850 pence, resulting in a unanimous opinion of the board of British for the agreement. Kraft said the deal would have a positive effect on the results of 2011 of about 5 cents per share and give a return on investment of around 15%, well above the cost of capital for the U.S. The new offer is 500 pence in cash and 0.1874 new shares of Kraft, compared to an original offer of 300 pence in cash and 0.2589 new shares. Kraft believes that this combination represents an appropriate strategy and complementary, which will create a leading company with a portfolio of more than 40 brands with annual sales each.

Cadbury, with 186 years of history, is well-known chocolate brands in Spain or Tokke Bones is a world leader in Trident gum because in addition to selling candy or making jellies Halls with Dulciora. On the other hand, the food giant, Kraft, with a 107-year-old, with brands such as coffee and Philadelphia cheese; Toblerone, Milk chocolates and Oreo cookies (Gole and Hilger, 2008, pp. 48).

The food company Kraft Foods Inc posted a rise in its first-quarter profit, sales and profits through the recent acquisition of chocolate maker Cadbury Plc. The biggest food manufacturer in North America also said it expects full-year profits reach $ 2 before extraordinary items. Kraft, which makes brands ranging from Oreo cookies to Oscar Mayer foods, said earnings before items were 49 cents per share in the first quarter, up 19.5% over the same period last year. Earlier this year, Kraft bought Cadbury 18.400 million, after a long dispute. In March, Kraft completed the sale of 3.700 million dollars from his pizza business to Nestle. Besides being the seventh largest cross-border merger in history, the union will create a company that billed U.S. $ 72,000 million worldwide, close to the number one sector, the Swiss Nestlé (Krotman, 2009, pp. 58).

An acquisition of 16.7 billion USD (not including debt of $ ...