Why is Cadbury such a weak target?
If you look at the Cadbury scenario, with a bid from Kraft Foods on the table and two potential bidders in the background, you may be forgiven for thinking that Cadbury is actually a minnow in the confectionery industry and not doing very well. However, the truth is Cadbury is a well-run business and has a well rounded reputation in confectionery industry although in the world like picture it is still relatively small compared to the likes of Kraft Foods.
It is probably the case that Cadbury failed to expand in the good times thereby leaving itself open to attack in this difficult economic situation. Analysts have said from day one that the business makes a perfect fit for Kraft Foods because the company has little or no exposure to the UK and Cadbury is predominantly UK and Europe although it does have a presence in America. It is the opportunity to lay the Cadbury business aside the Kraft Foods operations at the moment which probably makes the business more valuable to Kraft Foods but will the company pay up?
The truth is that Kraft Foods is under pressure to expand but this expansion must be done in a controlled environment where the return on any investment is there for all to see. So how high can Kraft Foods actually go?
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