Mining giant BHP makes huge offer for Fertiliser giant

Potash Corporation of Saskatchewan, the world largest fertilizer producer, on Tuesday has rejected a takeover bid of around $39 billion from BHP Billiton. The bid which is reported to have been made, was for $130 per Potash share, which represents a 20% premium on the share price of last week. The offer is believed to have for cash.

According to the Financial Times, the BHP's offer was rejected on the basis that is was grossly inadequate as it undervalues the company. Potash vowed that it will remain independent as it is believed that it has the right to use a poison pill, that will enable shareholder of the target company (in this case Potash) to acquire additional shares in the company after the takeover for a very discounted price. Such right would make the takeover less attractive as increases the price the acquirer has to pay (or suffers dilution).

Potash refused the bid on the belief that the fertilizer industry is just coming out of the recession and hence it is greatly undervalued. It is believed that PotashCorp shareholders could benefit from the current and potential value of the company as Potash is well geared to take advantage of the upturn. The industry is geared to become more consolidated as the further companies in different countries such as Russia and Canada seek to buy competitors to strengthen their market position.

Today BHP announced that it will take the bid to another level as it said it will take the offer directly to shareholders and hence become hostile...let's see how this huge proposed takeover will eventually end

Kraft made it...Finally it managed to get Cadburys commitment to sell

As they say the deal is no...and with this, Kraft have managed to get Cadbury's Board of Directors agreement to sell the company. This doesn't come for free to Kraft that has agreed to pay 840p per share which brings the total deal price of £11.6bn in a deal that involves both a cash and share element.

This is the second offer that Kraft made is much higher than the 745p which Kraft had made last September and that Cadbury had totally refused. The market was also expecting a move from either Ferrero or Hersheys as Cadbury preferred to be takenover in a friendly way (rather then in a hostile deal as Kraft tried to do in its initial approach) however both companies took to long to come up with an offer.

This deal did not go down really well with the famous US investor Warren Buffett who said that he had a lot of doubts on the deal. Kraft investors will not have the chance to vote on the deal, which involves the Kraft issuing 265m new shares, equivalent to about 18 per cent of its existing share capital, because that is below the 20 per cent level at which shareholder approval is required.

Mr Buffett, who holds more than 9 per cent of Kraft, said the company was worth more than its current stock price, which fell by 2 per cent at $28.72 in early Wall Street trading on Wednesday and hence the use of stock payment by Kraft make Cadbury's purchase a “very expensive deal”.

What do you think about the deal? Was it an ideal one or could Cadbury have made a better deal by waiting a bit more?

The merger of the Titans

It seems that companies are moving fast in trying to secure business deals before the economy recovers so as to try to capitalise on the recession. After the acquisition of Marvel by Disney, Kraft Foods (the owner of brands such as Oreos) tried its luck with Cadbury.

Although a heavy premium was being proposed to be paid (31% over the share price of the day), the initial offer has been rejected. Kraft offer was of £10.2 billion Kraft said said that the acquisition of Cadbury made good business sense as adding Cadbury would create a company with global revenues in excess of $50bn and create savings across the enlarged entity of $625m annually.

According to the chairman and chief executive of Kraft Foods, the proposed combination is about growth. Basically Karft would continue to build upon Cadbury's iconic brands and strong British heritage through increased investment and innovation. Kraft believes that the next stage for Cadbury will be a very challenging one however given the strength of Kraft,this will be facilitated as it has the experience in expanding and capitalising on brand growth. In rejecting the offer, Cadbury said the offer undervalued the company, and expressed confidence in its standalone strategy and growth prospects as a result of its strong brands, unique category and geographic scope.

The market is eagerly awaiting the next steps that Kraft will take...will it increase its offer further or will it try a hostile take over by trying to lure in large shareholders on Cadbury?