Topic: Growth Stocks

The Wall Street Stock Forecaster Hotline – Friday, September 11, 2009

Article Excerpt

KRAFT FOODS INC., $26.10, New York symbol KFT, launched a hostile takeover bid this week for U.K.-based Cadbury plc (New York symbol CBY), a leading maker of confectioneries, including chocolate, candy and gum. Kraft’s bid is worth roughly $16.8 billion, which is equal to 44% of its market cap. The offer consists of roughly 60% stock and 40% cash. As of June 30, 2009, Kraft held cash of just $1.7 billion, or $1.17 a share, so it will have to significantly add to its $18.6-billion long-term debt to complete this takeover. Adding Cadbury would raise Kraft’s yearly sales by roughly $8 billion, to $50 billion from $42 billion. As well, Kraft feels that the purchase would let it lower its yearly pre-tax costs by $625 million by the end of the third year following the takeover. It would accomplish this by merging the companies’ plants and marketing and product-development activities. In 2008, Kraft earned $2.8 billion, or $1.88 a share. Cadbury…