Kraft set on Cadbury bid; Facet unlikely to gain other offers; Cisco wins control of Tandberg

By Cristal Cody

Tupelo, Miss., Dec. 4 - Kraft Foods Inc. released its formal $16.3 billion hostile takeover offer of British confectioner Cadbury plc on Friday at the same terms as announced in November.

Even with hints of potential rival bids from the Hershey Co. and Ferrero International SA and Cadbury's stock trading well above the offer, Kraft has little incentive to increase its proposal, an analyst told Prospect News.

Meanwhile, shares of Facet Biotech Corp. traded Friday below an increased $17.50-a-share cash bid made a day earlier by Biogen Idec Inc. as investors realize this likely is the last offer, an analyst said in an interview.

In other situations, although Cisco Systems Inc. gained just under the 90% of shares in Norwegian video conferencing company Tandberg ASA that it had sought in the $3.4 billion tender offer, the company said Friday it would close the deal.

On Wall Street on Friday, stocks edged up slightly.

The Dow Jones Industrial Average closed up 22.75 points, or 0.22%, at 10,388.90.

The Standard & Poor's 500 index also rose 6.06 points, or 0.55%, to 1,105.98, and the Nasdaq Composite index added 21.21 points, or 0.98%, to end at 2,194.35.

Kraft takes formal deal step

As previously announced, Kraft has offered Cadbury shareholders 300p a share in cash and 0.2589 of a share of Kraft.

Based on Kraft's closing share price of $26.50 on Tuesday, the offer values Cadbury shares at 713p each.

Cadbury shares traded Friday up 0.02% at 800.20p.

Kraft's offer is open until Jan. 5.

"We remain confident that the unique combination of Kraft Foods and Cadbury would create a significant growth opportunity for both businesses," Kraft Foods chief executive officer Irene B. Rosenfeld said in a statement Friday. "Our offer is fully financed, represents a substantial premium to Cadbury's unaffected share price and provides both immediate value certainty and meaningful longer-term upside potential."

Edgar Roesch, an analyst with Soleil Securities Group, Inc., told Prospect News on Friday that Kraft's bid is "still a good premium versus where the stock traded before any M&A activity came into Cadbury's share price."

Also, while Hershey, which is controlled by the Hershey Trust, could make a bid for Cadbury, the combination is "more of a stretch financially," Roesch said.

Hershey, Pa.-based chocolate maker Hershey and private Italy chocolate maker Ferrero said in November the companies were considering a bid for Cadbury.

"Kraft is betting that no other bidder will emerge," Roesch said. "Their bet was largely right based on what they knew at the time - Hershey was reticent about making a big acquisition and diluting the Hershey Trust's control of the company. What they're saying is there's rumblings about another bid, but let's see what emerges -why outbid themselves at this point."

Kraft shares rose 15 cents, or 0.57%, to $26.57 on Friday.

Hershey shares closed at $35.99, up 9 cents, or up 0.25%.

Facet's last chance

Facet said in a statement late Thursday that its board would review the new offer of $17.50 a share, up 21% from Biogen's previous bid of $14.50 a share in cash.

Biogen said in a statement Thursday that its "best and final offer" provides a premium of 98% over the $8.82-a-share closing price of Facet's stock on Sept. 3, the last day before Biogen announced a proposal.

"The $17.50 bid is very likely the highest they're going to get," Hamad Khorsand, an analyst with BWS Financial Inc., told Prospect News on Friday.

"Obviously, management would like a higher price from Biogen, but I don't think Biogen is willing to offer more, and the economies related to this transaction aren't favorable for a competing company to get into the mix and try to bid against Biogen," he said.

That's because Biogen already has a 50% partnership with Facet in the development of the multiple sclerosis drug daclizumab.

Cambridge, Mass.-based Biogen has partnered with Facet since 2005 to develop cancer and multiple sclerosis drug treatments.

Redwood City, Calif.-based Facet was created in December 2008 as a spin-off from Incline Village, Nev.-based PDL BioPharma, Inc.

Biogen's new bid values Facet at about $439 million, up from its earlier offer of $356 million, which was rejected by Facet's board. The tender offer expires on Dec. 16.

Facet shares closed Friday up 6 cents, or 0.35%, at $17.29.

In a letter to Facet investors on Thursday, Biogen president and chief executive officer James Mullen said that with Facet's monthly cash burn rate and lease obligations, "Facet does not have the cash to fund its operations beyond 2012, well before completion of the daclizumab clinical program, without obtaining additional financing, which we believe will be dilutive."

Biogen shares gained 80 cents, or 1.69%, to close at $48.18 on Friday.

Cisco takes what it can get

Although Cisco gained 89% of Tandberg's shares, just shy of the 90% it sought, the company said it received enough to close the transaction.

San Jose, Calif.-based Cisco's earlier offer had been rejected by more than 30% of Tandberg's shareholders, forcing the company to raise the bid on Nov. 16 to 170 Norwegian kroner a share from 153 kroner a share.

An analyst told Prospect News that it's not surprising that Cisco went through with the acquisition of the international videoconferencing company even though it did not receive all of the outstanding shares.

"It's strategic. All the original rationale still exists," the analyst said.

Cisco shares moved up 33 cents, or 1.38%, to $24.16 on Friday.

Tandberg shares fell 0.06% to Kr 163.10.

Mentioned in this article:

Biogen Idec Inc. Nasdaq: BIIB

Cadbury plc London: CBRY

Cisco Systems, Inc. Nasdaq: CSCO

Facet Biotech Corp. Nasdaq: FACT

Hershey Co. NYSE: HSY

Kraft Foods Inc. NYSE: KFT

PDL BioPharma, Inc. Nasdaq: PDLI

Tandberg ASA Oslo: TAA

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