Candy fight possible over Cadbury; Abu Dhabi creates industry force; Energy bid talk fizzles

By Cristal Cody

Tupelo, Miss., Sept. 9 - Kraft Foods Inc. stayed in the news on Wednesday as market observers continue to expect the food company to increase its bid for Cadbury plc, but now at least two other candy makers could jump in the fray, a market source said Wednesday.

Meanwhile, two overseas analysts told Prospect News that the S$2.50 billion buyout of Singapore-based Chartered Semiconductor Manufacturing Ltd. is likely to get done and make the company a heavyweight in the industry.

In other situations on Wednesday, an analyst said investors pulled some of their gains from Energy Conversion Devices, Inc. shares, which rose a day earlier on takeover rumors.

Also on Wednesday, MSC Software Corp. said it would opt for a rival takeover bid and terminate a deal it reached in July, unless Symphony Technology Group LLC comes up with a better offer by next week.

On Wall Street, stocks edged higher.

The Dow Jones Industrial Average added 49.88 points, or 0.53%, to close at 9,547.22.

The Standard & Poor's 500 index rose 7.98, or 0.78%, to 1,033.37, and the Nasdaq Composite index closed up 22.62 points, or 1.11%, at 2,060.39.

Candy fight expected

Analysts widely expect Kraft to offer more for Cadbury after the British candy company rejected a £10.20 billion offer.

Northfield, Ill.-based Kraft offered 300p and 0.2589 of a share for every share of Cadbury.

But now, Hershey Co. or Nestlé SA could make a bid for all or part of the company, a market source said Wednesday.

"It would make sense for Nestlé [or] Hershey to step in if/when Kraft reaches the top end of the price it is prepared to pay for Cadbury," a market source said Wednesday. "The other scenarios are Kraft acquiring Cadbury, either through a friendly or hostile deal, or Cadbury remaining stand alone. In the event of an auction involving Nestlé, we would target a final takeout price above 900p a share."

The source puts Uxbridge, U.K.-based Cadbury's chances of remaining on its own at less than 20%.

Kraft, the world's second-largest food company, said Wednesday at the Barclays Capital Back-to-School Consumer Conference that the "time is right" for a deal with Cadbury.

"We have great respect for what Cadbury has achieved and would like to negotiate a combination on a friendly basis," executives said at the conference. "We will continue to assess the opportunity."

Cadbury's U.S.-listed shares fell 8 cents, or 0.15%, to close at $51.80.

Kraft shares added 40 cents, or 1.51%, to $26.85.

Shares of Pennsylvania-based Hershey closed up $1.36, or 3.48%, at $40.49.

Switzerland-based Nestlé's stock lost 0.69% to CHF 43.38.

Globalfoundries pushes ahead

Advanced Technology Investment Co. LLC of Abu Dhabi's offer to acquire Chartered Semiconductor would create an industry powerhouse in combination with a purchase made earlier this year, HSBC analyst Steven Pelayo told Prospect News in an email.

The Abu Dhabi government-owned company in March acquired a controlling stake in Globalfoundries, a U.S.-based semiconductor manufacturing joint venture with Advanced Micro Devices Inc.

"Prior to this announcement, we had expected Globalfoundries to not seriously disrupt the existing foundry competitive landscape for at least another one [or] two years as the company was still ramping capacity in Germany and recently broke ground on a new fab in New York," said Pelayo, a global technology analyst with HSBC Holdings plc in Hong Kong.

"However, combining Globalfoundries with Chartered makes them a more formidable threat today based on broadening customer exposure from Chartered, clearer technology roadmap, access to capital from ATIC and access to existing capacity," he said.

Under the terms of the deal, ATIC will pay S$2.68 a share and $18.641 for each American Depositary Share of Chartered Semiconductor. The total deal, including debt, is valued at S$5.60 billion.

The price could be deemed "generous" considering the company's debt and negative free cash flow in nine out of the last 10 years, Pelayo said.

"The combination, though, appears so complimentary that perhaps the premium is justified," he said.

The transaction must receive approval from Chartered shareholders and the High Court of Singapore, with closing scheduled in the fourth quarter.

Temasek Holdings, a Singapore investment agency that owns about 62% of Chartered's outstanding shares, has agreed to vote in support of the transaction.

Although the deal requires Singapore court approval, no opposition is expected, Patrick Yau, an analyst with Macquarie Securities Pte. Ltd. in Singapore, told Prospect News.

"Minorities still do vote, so we will have to observe how the stock performs closer to the vote," Yau said in an emailed comment.

Chartered's depository shares fell 5 cents, or 0.27%, to close Wednesday at $18.30.

Energy run-up goes flat

Energy Conversion shares fell 67 cents, or 5.15%, to close Wednesday at $12.34.

On Tuesday, options activity picked up and shares of the solar panel maker jumped $2.60, or 25.00%, to $13.01 on reports Applied Materials, Inc. could be interested in a combination.

Rochester Hills, Mich.-based Energy Conversion's stock is well off its yearly high of $69.86.

Semiconductor chip equipment maker Applied Materials did not have a comment on the buzz.

But, Applied Materials isn't seen as a likely buyer, an analyst told Prospect News on Wednesday.

"It might be profit-taking because the stock was up so much yesterday," on why the stock lost ground, the source said.

Energy Conversion, though, could have a hard time if it continues as a stand-alone company, the source said.

"They're struggling, but if they can ride out this downturn and the industry stabilizes, they could be OK," the analyst said. "They're not as in good as shape as other companies out there."

Santa Clara, Calif.-based Applied Materials' stock rose 22 cents, or 1.61%, to $13.90.

MSC plays mum

MSC said the rival offer from a private equity firm is for $8.00 a share in cash, compared to the company's previous terms to sell for $7.63 a share.

Symphony Technology spokesman Carol Sacks told Prospect News on Wednesday that the company has no comment on the announcement.

Palo Alto, Calif.-based Symphony Technology agreed to pay $360 million to acquire MSC in July.

Santa Ana, Calif.-based MSC said in a statement that after if a superior bid is not made by Tuesday, it would enter into a new proposal.

Santa Ana, Calif.-based MSC did not release information on the identity of the new bidder.

The company's stock gained 52 cents, or 6.83%, to close Wednesday at $8.13.

Mentioned in this article:

Applied Materials, Inc. Nasdaq: AMAT

Cadbury plc NYSE: CBY

Chartered Semiconductor Manufacturing Ltd. Nasdaq: CHRT

Energy Conversion Devices, Inc. Nasdaq: ENER

Hershey Co. NYSE: HSY

Kraft Foods Inc. NYSE: KFT

MSC Software Corp. Nasdaq: MSCS

Nestlé SA Swiss: NESN

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.