Sunday, September 13, 2009

Cadbury’s survival rests on Todd Stitzer’s vision

Ever since Todd Stitzer, chief executive of Cadbury, demerged the group’s drinks business last year, he has done everything he can to become the City’s investor pin-up. He has followed the rule book, turning it into a focused company with international reach and an exposure to emerging markets.

Huge costs have been taken out over the past two years, including 7,500 redundancies. Stitzer has also avoided the elephant trap of overloading the balance sheet with debt.

The one thing he has failed to do during this journey is convince the City to put a higher stock market rating on his shares, to a level that would put it out of the reach of an opportunistic bidder. This is the single reason why the company found itself on the receiving end of a £10 billion bid from Kraft, America’s biggest food group, last week. Against its international peers, Cadbury had looked undervalued, so much so that it allowed Kraft to offer a 40% premium to the pre-bid closing price. And still analysts are saying it is cheap.

Stitzer could have achieved a higher rating by moving the firm’s domicile to America, a country that traditionally puts higher valuations on quoted companies and where the firm already has a big investor base. But he knows the deep Quaker roots that Cadbury has in the UK would rule this out.

This is now Stitzer’s chance to sell his story. He has to convince investors he can achieve his ambition of growing margins to 15% by 2011 and that, combined with bolt-on acquisitions, revenues can also be lifted to boost the share price. At the current bid price of 745p (although the price is lower when last week’s rise of sterling is taken into account) that is not a hard job. The market thinks the same way and Cadbury’s price closed the week at 775½p.

However, if Kraft starts to move its bid price towards 850p a share, then it will be down to Stitzer’s salesmanship and the appetite of investors. They know that if they reject an offer it would see Cadbury’s shares drift down to 600p and not recover for 18 months.

I had dinner with Stitzer on Thursday night. He believes he can do it and he has a road map to show the growth opportunities over the next five years. He is not interested in any short-term gimmicks to “goose” the share price.

Instead he believes in long-term value generation. He says one way of killing that value is for Kraft to start pushing its own products down Cadbury’s international pipeline, turning the company into an unwieldy food conglomerate, an argument Irene Rosenfeld, the combative, roller-blading chief executive of Kraft, rejects.

There is a price Cadbury will go for, but Kraft is not there yet. There are other cash-rich funds out there and Unilever and PepsiCo will be taking a look. Cadbury is now as much of a play on the emerging-market economies as it is on mature western markets. In India it is starting to sell slow-melting chocolate balls as fast as they can make them, and in Mexico and Brazil they are learning to chew as much gum as the Americans.

But don’t write off Kraft. Despite earlier doubts, US banks are falling over themselves to lend cash to finance the offer. Rosenfeld has a track record of investing through hard times. She wants Cadbury and has identified enough big synergies in processes, technology and global distribution to build a food powerhouse. She will not buy at any price, though. She has rebuilt Kraft over the past three years and has no intention of squandering those gains.

This is going to be a long game. For investors, the spotlight will focus on Cadbury’s value proposition measured against the value of Kraft shares — it is financing 60% of its bid by paper — and its cash. If Kraft raises its offer, the value of that paper currency will become increasingly important. Kraft and Cadbury will take this battle to their investors and that is where the final decision will ultimately rest.

No comments:

Disclaimer

Disclaimer : All information given here is for information purpose only. Users are advised to rely on their own judgement or investment advisor when making investment decisions. This blog is not liable and take no responsibility for any loss or profit arising out of such decisions being made by anyone acting on such advice.

Disclaimer && Decalration

This blog is formed for sharing useful information from financial world. This blog aims to increase the awareness among the people so that they are well informed .The blog also shares some details for investor, trader ,newbie friends in stock market on free buy/sell/hold recommendations. Here the recommendations are shared along with information on Stock Splits, Right Issues, Bonus Issues, Latest Stock market updates. This publication is not, and should not be construed to be, an offer to sell or a solicitation of an offer to buy any security. This publication, its publisher, and its editor do not purport to provide a complete analysis of any company's financial position. The publisher and editor are not, and do not purport to be, registered investment advisors. Any investment should be made only after consulting a professional investment advisor and only after reviewing the financial statements and other pertinent corporate information about the company. Investing in securities is speculative and carries a high degree of risk. Past performance does not guarantee future results. This publication is based exclusively on information generally available to the public and does not contain any material, non-public information. The information on which it is based is believed to be reliable. Nevertheless, the publisher cannot guarantee the accuracy or completeness of the information. This publication contains forward-looking statements, including statements regarding expected continual growth of the featured company and/or industry. The publisher notes that statements contained herein that look forward in time, which include everything other than historical information, involve risks and uncertainties that may affect the company's actual results of operations. Factors that could cause actual results to differ include the size and growth of the market for the company's products and services, the company's ability to fund its capital requirements in the near term and long term, pricing pressures, etc.

References


References :- Link Market - Free Link Exchange, Link Swap and Link Trade Directory
Have you ever tried to exchange links, swap links, or trade links? Was it hard? Use link market instead; - it is easy to use, free and very smart. It will save you hours of work.

Business PandaOnline business index
Xmatrix SoftwareXmatrix software publishes award-winning software, including x dupfile. And we have a xmatrix online business index that is growing.
Eladvertise.net
Buy text link advertisement for unlimited impressions. Act fast. Price starts at 15 euro and goes up.
King Cole Catering
Event and banquet caterer - banquet room rentals - weddings, receptions
Pulbic Adjuster Galveston
Www. Docudamage. Com is an information resource created by a public adjuster for policyholders, adjusters and contractors wishing to learn more about property damage documentation & the claims process.
Public Adjuster Galveston
We are a texas public insurance adjusting firm located in houston, tx. We represent home & business owners to their insurance companies on underpaid property damage claims. We are happy to give you a free evaluation of your claim. Call today!
Foreclosure - Financial - Credit Repair: Tips & Articles
Homeowner, credit repair, foreclosure, mortgage, investment, and stock, tips, articles and help. Financial help articles for consumers.
Used Cars Uk
Autoleague. Co. Uk is the right place for you to find used cars or dealers that sell used cars anywhere in the uk. Advertise your car for free. Make An Extra $2000 - $5000 Every Month With Vemmabuilder!
We will show you how to live a healthier lifestyle and earn a large income for little cost with our vemma products and vemmabuilder marketing system! Apple Computers, Parts, Software And Hd Background Free
Save on computer parts, computer hardware, laptop computers, desktop computers at ewoau. Com. Now free downloads and tons hd background free.
1v Web Design
Website design and development | free seo information and code tips | advertise on our world wide directory | find link partner's to help increase your page rankings | free stuff and much much more. ..
Shop All Broadband & Telephone | Phone Service Providers Here!
Shop communication service providers, price quotes and solutions for cable internet, high-speed satellite, fixed wireless, dsl, t1, t-1, voice t1, integrated t1, pri t1, bonded t1, ds3, ds-3, oc3, oc12, ethernet, vpn, mpls, sip trunking & voip here. Yard Signs
Speedysignsusa is one of the largest suppliers of yard signs, election signs, and political signs. Our store features a large selection of professionally designed templates, an online design tool, and the ability to upload your ready to print artwork Free Music Download
Download free music movies games at http://www. Topfreemusicdownloadsite.com Fixed Gas Detectors
Auric pacific engineering is the leading distributor of fixed gas detectors, portable gas detectors, solenoid valves and gas analyzers.Sediment Erosion Control
Deltalok is a leading company specializing in sediment erosion control, soil erosion control solutions.Harley Davidson Zone
Harley davidson zone! Customize yourself and your harley davidson motorcycle like you've always wanted. Whatever you ride we have what you are looking for. From jackets, boots and helmets to chrome accessories we are your harley davidson zoneLuontaistuotteet Proteiini Hiilihydraatit Immolina Sikainfluenssa
Www. Nutrition. Fi kun ei ehdi kaikista lisäravinteet ja luontaistuote jutuista huolehtimaan. Vitamiini - ja ravintolisä -tuotteet arkeen ja urheiluun. Sikainfluenssa - eli h1n1 virusta vastaan kehitetty immolina Gastrodirect
Grossiste horeca avec plus de 30. 000 articles pour livraison immediate. Garantie, sav, livraison rapide. Ce que il vous faut, four à pizza, refrigeration, materiel de collectivities.Pink Stretch Limousine
Get your pink stretch hummer party limo. Special events, sweet 16, bachelorette party, prom, wedding, bring baby home, kid's birthday, homecoming, graduation, concerts,batmitzvah, corporate events, quinceanera, anniversary. Affordable hire options.