Kraft (KFT) will likely get Cadbury PLC (CBY), say our friends at Gimme Credit, despite the fact that its latest offer was spurned by the British confectioner, and despite the fact that Warren Buffett’s Berkshire Hathaway (BRKB) yesterday opposed a share offering to raise funds for a deal. Analyst B. Craig Hutson says Kraft definitely has to raise its offer to 800 pence.
His rationale is that Kraft yesterday said it would sell its pizza business to Nestle for $3.7 billion. That’s 13.5 times the Ebitda Kraft probably made off pizza last year, he reckons. But if Kraft is selling the pizza business to raise money for Cadbury, than the latter should be worth a comparable multiple, whereas Kraft is only offering 12.4 times Cadbury’s trailing Ebitda.
Kraft has the wherewithal to up its bid, and Hutson thinks Buffett won’t, in the end, stand in the way of what could be a good deal.
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