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Has Cadbury been sold on the cheap?

Despite yesterday's £8.50 a share offer from Kraft Foods receiving a recommendation from the Cadbury board there is concern today that the company may have been sold on the cheap. Legal and General, which was around 5% of the company, has today stated it believes the company is worth in excess of nine pounds a share and is not happy with the recommendation from the Cadbury board. So what next?

While ultimately Legal and General can continue to contest the bid, possibly in the hope that Hershey would come in with a higher offer, if Kraft Foods receives 50% acceptances then effectively the deal is done and the company has control of Cadbury. Despite suggestions in the press today it looks as though the offer will go through with a potential bid from Hershey less likely by the hour. Whether the company has effectively sold itself short is debatable but the attraction of money today rather than potential share price increases tomorrow is ultimately more powerful.

There will always be disagreements regarding the value of companies looking forward but there does seem to be a general consensus that Kraft Foods has not overpaid for the UK giant. The softly softly approach from the Kraft Foods management appears to have worked perfectly.

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