Cadbury move may limit investors; quick deal OK likely for Wyeth; bid sends SkyTerra shares up

By Cristal Cody

Tupelo, Miss., Sept. 23 - Cadbury plc's early request to U.K. takeover regulators "signals weakness" in the candy maker's defense strategy against a £10 billion bid from food manufacturer Kraft Foods Inc., a market observer noted on Wednesday.

Meanwhile, U.S. regulatory approval of Pfizer Inc.'s $68 million acquisition of Wyeth is expected soon because the companies agreed to divest some animal health assets earlier this week, an analyst said Wednesday.

In other situations, shares traded over the counter of SkyTerra Communications, Inc. jumped 39% on Wednesday after the mobile satellite communications provider said that it will be taken private for $5.00 a share.

On Wall Street, stocks slipped.

The Dow Jones Industrial Average lost 81.32 points, or 0.83%, to close Wednesday at 9,748.55.

The Standard & Poor's 500 index fell 10.79 points, or 1.01%, to 1,060.87, and the Nasdaq Composite index dropped 14.88 points, or 0.69%, to 2,131.42.

Cadbury puzzles market

Uxbridge, England-based Cadbury has rejected Kraft's cash-and-stock proposal of 300p and 0.2589 of a share of Kraft for each Cadbury share as too low.

The offer values Cadbury shares at about 716p a share, but most market observers have said a fairer bid would be about 860p a share.

On Tuesday, it was reported that Cadbury had asked the U.K. Panel on Takeovers and Mergers to force Kraft to made a formal bid or walk away.

The agency is expected to give Northfield, Ill.-based Kraft a timeframe of two to eight weeks.

"We believe that the main objective for this early PUSU [put up or shut up] request is to limit the shift in Cadbury's shareholder base from long-term to short-term investors," a market source said Wednesday. "Since the approach by Kraft has been disclosed, we estimate that 18% of the share capital at Cadbury exchanged hands."

Cadbury shares rose 0.13% to 789.5p.

Kraft's stock closed down 21 cents, or 0.79%, at $26.28 on Wednesday.

Pfizer, Wyeth close in on OKs

On Monday, Pfizer and Wyeth said they will divest some animal health assets to German pharmaceutical company Boehringer Ingelheim as part of antitrust requirements for the transaction.

The divestments indicate likely approval for the merger from the Federal Trade Commission, an analyst said Wednesday.

"A firm buyer for a firm set of assets indicates that Pfizer is likely to have agreed with the FTC on the necessary divestments," the source said.

The announcement narrows the timing for the deal to close to mid to late October, the source said.

Boehringer Ingelheim will acquire Wyeth's Fort Dodge, Iowa, animal health products, research and manufacturing facilities as well as other animal health assets that include animal vaccines in Australia and cattle vaccines in the European Union and South Africa.

Pfizer's acquisition of Wyeth remains subject to regulatory approval in Canada, China and Australia.

In July, the European Commission approved the transaction after pharmaceutical giant Pfizer agreed to divest certain animal health assets.

Also in July, Pfizer said China's Ministry of Commerce had extended its regulatory review of the transaction.

With approval from the Federal Trade Commission expected soon, the biggest risk to timing is China's approval, the analyst said.

"Despite largely complementary offerings in China, we understand that there is overlap in animal health products in China. The divestment to Boehringer does not address competition issues in China," the analyst said.

New York-based Pfizer has offered $33.00 in cash and 0.985 of a share of Pfizer stock for every share of Wyeth.

Pfizer expects the transaction to close early in the fourth quarter.

Shares of Madison, N.J.-based Wyeth fell 49 cents, or 1.01%, to close at $48.05.

Pfizer shares shed 37 cents, or 2.20%, to $16.43.

SkyTerra takes private path

The $5.00-a-share offer for SkyTerra represents a premium of about 47% over the company's closing stock price of $3.40 on Tuesday.

Shares closed up $1.31, or 38.53%, at $4.71 on Wednesday. The stock has traded from 80 cents to $5.00 over the past year.

SkyTerra will be taken private in a buyout offer from Harbinger Capital Partners Master Fund I, Ltd. and Harbinger Capital Partners Special Situations Fund, LP for the remaining shares of the company that the funds do not already hold.

Harbinger and its affiliates control about 48% of SkyTerra's outstanding stock.

SkyTerra said in a statement that because the funds have 48% of the voting power of company shares, approval of the merger is "virtually assured."

Reston, Va.-based SkyTerra said its special committee of independent directors conducted a thorough evaluation of strategic alternatives.

The transaction must be approved by the holders of a majority of SkyTerra shares and receive regulatory clearance from the Federal Communications Commission.

SkyTerra representatives could not be reached for additional information.

The company expects the buyout to close late this year or early next year.

Mentioned in this article:

Cadbury plc London: CBRY

Kraft Foods Inc. NYSE: KFT

Pfizer Inc. NYSE: PFE

SkyTerra Communications, Inc. OTCBB: SKYT

Wyeth NYSE: WYE

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