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The real cost of the Cadbury bid

As Kraft Foods this weekend thinks over a possible £10 billion offer for UK outfit Cadbury, the real cost of the potential bid has been revealed. Kraft Foods has around £5 billion available as a sweetener in the form of a cash payment as well as shares in Kraft Foods in exchange for Cadbury shares. However, it has been revealed that both parties stand on the verge of massive banking fees if the takeover offer goes ahead.

It is believed the Kraft Foods will be charged in excess of £100 million by bankers and advisers in relation to the deal with Cadbury set to foot a bill for in excess of £50 million. This is the often hidden cost of takeovers and mergers which many investors and the public never see. So while Kraft Foods obviously has a great interest in Cadbury, this weekend is a make or break situation because an inadequate offer could fail and still cost £100 million whereby an over the top offer will probably succeed but possibly attract the wrath of Kraft Foods shareholders.

The situation is balanced on a knife edge and could go either way although informed sources in the city suggested a bid will be forthcoming before the 5 p.m. deadline on Monday.

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