Archive for September, 2009

Cadbury stresses Kraft bid makes no strategic sense (Reuters)

Friday, September 25th, 2009 | Finance News

LONDON (Reuters) –
Cadbury's CEO Todd Stitzer said on Friday he did not believe that Kraft's multi-billion pound bid for Cadbury made strategic or financial sense as he looked to clarify previously reported remarks.

"For the avoidance of doubt, Mr Stitzer does not believe that Kraft's proposal makes strategic or financial sense for Cadbury and his comments should not be interpreted in any other way," a Cadbury statement said.

Cadbury added that commentary on this issue has misconstrued Stitzer's remarks to imply a softening of his view regarding a combination between Kraft and Cadbury, as the two sides await a ruling from Britain's Takeover Panel on the timing of a bid.

Stitzer talked to investors at a Bank of America/Merrill Lynch conference on Wednesday and was cited in a note distributed by the bank as saying there was some strategic sense in combining with Kraft and talking of potential valuations for Cadbury.

The bank later moved to clarify Stitzer's remarks saying his comments on valuation were only made in the context of comparable transactions in the industry and did not imply a fair value for the business, while Cadbury had contact with the panel on the Wednesday with regard to some of Stitzer's remarks.

The panel is still considering how long it will allow Kraft to come up with a formal bid, and Stitzer's comments have prompted it to look closely at what he said at the investor conference, sources close to the situation said.

The panel considers all comments made by companies on a selective basis in a bid situation, and this is likely to have delayed its decision after Cadbury went to the panel on Monday to ask it to send Kraft a "put up or shut up" request.

The bank note said Stitzer seemed to admit that a 15 times EBITDA multiple would be a fair price for Cadbury which equates to 900 pence compared with to the original value of Kraft's bid at 745p, but later the bank said the reference was in relation to comparable transactions and did not imply fair value.

The author of the note - U.S. consumer sales specialist Simon Archer - is still working at the bank.

Kraft CEO Irene Rosenfeld declined to comment on Stitzer's latest remarks and the potential impact on the panel ruling during a discussion on world hunger in New York.

She told employees on Thursday at the group's headquarters in Northfield, Illinois, the Cadbury deal was something the group would like to do and not something it had to do.

Kraft launched its cash and share deal for Cadbury on September 7 which was promptly rejected. Later Cadbury's Chairman Roger Carr said it was an "unappealing prospect" being absorbed into Kraft's "low growth conglomerate business."

The bid was valued at 10.2 billion pounds ($16.31 billion), but the fall in Kraft share price currently puts the value of the bid at 728 pence or 10 billion pounds compared with Cadbury's share price closing up 0.7 percent at 800-1/2p.

Kraft shares were up 0.3 percent at $26.46 by 1555 GMT. (Reporting by David Jones; editing by Sitaraman Shankar and David Cowell)

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Sept consumer sentiment highest since Jan 2008 (Reuters)

Friday, September 25th, 2009 | Finance News

NEW YORK (Reuters) –
U.S. consumer sentiment rose in late September to the highest since January 2008 as expectations of an economic rebound gathered momentum, a survey showed on Friday.

The data added to indications the economy is pulling out of a lengthy recession more powerfully than many analysts had expected a few months ago, although doubts persist about how much staying power the rebound may have.

The Reuters/University of Michigan Surveys of Consumers said its final index of sentiment for September rose to 73.5 from 65.7 in August. This was above economists' median expectation for a reading of 70.3, according to a Reuters poll.

The index of consumer expectations rose to 73.5, the highest in two years, from 65.0 in August.

U.S. stock indexes initially bounced on the news but then slipped, while Treasury debt prices were off slightly and the dollar fell against the yen and euro.

"The same pace of gains in confidence continued in late September as the economic news reaching consumers grew even more positive," the Reuters/University of Michigan Surveys of Consumers said in a statement. "Consumers reported that the economy had already begun to improve and anticipated further gains in the year ahead."

The index of current conditions rose to 73.4 in late September from 66.6 in August.

"It looks like people feel better about both current conditions and the future. If we can only get business sentiment to improve a bit more, we'd probably go from a yellow light to a green light," said Gary Thayer, macro strategist with Wells Fargo Advisors in St. Louis. "If business sentiment picks up, the job situation would improve and consumer sentiment will improve further."

The survey's 12-month economic outlook jumped to 88 in late September from 69 in late August.

"The data provide considerable evidence that the economy has already begun to recover," the Reuters/UMich statement said. "Nonetheless, the pace of gains in consumer spending are still expected to be slower than usual due to expected lags in job and income gains as well as the renewed desires of consumers to save and the more limited availability of credit."

(Additional reporting by Ellen Freilich)

(Reporting by John Parry; Editing by James Dalgleish and Dan Grebler)

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Morgan Stanley leads as M&A shows signs of life (Reuters)

Friday, September 25th, 2009 | Finance News

LONDON/NEW YORK (Reuters) –
Morgan Stanley (MS.N) is outrunning archrival Goldman Sachs (GS.N) as 2009's busiest adviser on mergers as optimism grows that the crippling effects of the financial crisis on dealmaking may be easing.

Morgan's strong showing under new merger chief Robert Kindler not only spells prestige and fees, but marks a rebound for the bank after it fell to fifth position in 2008.

"I'm having fun," says Kindler, a former Wall Street lawyer who joined Morgan Stanley three years ago from JPMorgan (JPM.N).

Morgan has overtaken Goldman as the top-ranked adviser for both global and U.S. mergers and acquisitions, working on deals worth $490.9 billion so far this year, as global M&A plummeted 41 percent to $1.392 trillion.

( For a graphic displaying the top 10 rankings, click on http://graphics.thomsonreuters.com/099/GLB_INBMA0909.gif)

Kindler told Reuters it was "way too early to call the bottom of the M&A market" but said he saw promising signs.

"The two things that are most encouraging is that (strategic buyers) are back doing deals that make industrial sense and the credit markets are back open. That's very good for M&A. The negative is that we have a volatile equity market," he said in a telephone interview.

The value of deals totaled $369.3 billion in the third quarter, down 54 percent compared to the same quarter in 2008, according to Thomson Reuters data.

For the year to date, fees for completed deals fell an estimated 57 percent to $11.9 billion.

(For a graphic displaying fee rankings, click on http://graphics.thomsonreuters.com/099/GLB_INBFS0909.gif)

European M&A in the year to date has more than halved to $433.8 billion -- worse than U.S. and Asian declines of 43 and 38 percent respectively.

While the top spot in the M&A "league tables" is a highly sought-after position, Morgan Stanley still trails Goldman in perhaps the most important metric -- earnings.

Morgan has posted two quarterly losses this year and has lagged far behind Goldman, which has stepped up its risk-taking and was rewarded with blowout trading results.

Analysts expect Morgan Stanley to post a small loss in 2009, while Goldman is expected post net earnings of about $8.5 billion, according to Reuters Estimates.

BACK ON TOP

If Morgan Stanley can maintain its lead until the end of the year, it will top the tables for the first time since 1996, based on Thomson Reuters data.

That would mark a decisive recovery from 2008, when the bank fell to fifth in the rankings and the demise of Lehman Brothers and fire sales of Bear Stearns and Merrill Lynch cast doubt over the viability of standalone investment banks.

Scott Moeller, who heads the M&A Research Center at Cass Business School in London, said Morgan would have been keen to improve its ranking because M&A advice gives banks access to top executives and can lead to a lot of follow-up fees.

"It's very important from Morgan Stanley's perspective that last year be perceived as a fluke and not a trend, and this year's results so far seem to prove that," said Moeller, who worked at Morgan Stanley for more than a decade.

From 2005 to 2007, Morgan ranked second behind Goldman. It suffered last year partly because it did not advise on the $113 billion spinoff of cigarette-maker Philip Morris.

This year, it has worked on seven of the top 10 deals, including two drug industry mega-mergers -- Wyeth (WYE.N) and Pfizer (PFE.N), and Schering-Plough and Merck (MRK.N) -- a joint venture between miners Rio Tinto (RIO.L) (RIO.AX) and BHP Billiton (BLT.L) (BHP.AX), and the restructuring of General Motors (GM.UL).

Kindler, who took the helm in February after the death of predecessor Gavin MacDonald, said the most notable trend was that a handful of top firms were consolidating market share.

"We've basically maintained our M&A strength," he said. "Success in M&A is really the result of many, many years of consistent client coverage."

HEALTHIER ENVIRONMENT

Bankers and analysts have hailed a clutch of recent deals as evidence that long-mothballed strategic plans are back, as executives regain some confidence, financing and capital markets recover, and the economic gloom lifts. [ID:nLA188442]

"This year has been a tough one both in terms of volumes and revenue, but I'm quite convinced that 2009 will be the trough of this M&A cycle," said Brett Olsher, co-head of global M&A at Deutsche Bank, which ranks No. 5 for the year to date.

Olsher said Kraft Food Inc's (KFT.N) $16 billion tilt at UK chocolate-maker Cadbury Plc (CBRY.L) epitomized the market shift.

"It's highly strategic and cross-border, with a consideration mixture of cash and shares. It has a number of elements that suggest we are entering a more interesting and healthier M&A environment," Olsher said.

Deutsche is one of seven financial advisers on the deal.

Even private equity firms, starved of the cheap debt that fueled boom-year deals and burdened by ailing companies in their portfolios, are showing some signs of life.

Firms such as Kohlberg Kravis Roberts & Co (KKR.UL) were responsible for a fifth of all takeovers in 2006 but just 3.2 percent so far this year.

Still, four of 2009's five largest deals by buyout houses took place in this quarter, including the CVC-backed approach to British transport company National Express Group Plc (NEX.L) and eBay Inc's (EBAY.O) planned sale of a stake in Skype to an investor group.

Morgan Stanley's Kindler said private equity firms would probably look at spin-offs, buyouts of sub-$5 billion companies, and highly structured financings.

"I think it's going to be a while until we see deals of size from private equity. But they are still going to be very active," he said.

(Editing by Ted Kerr)

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