Buce Wasserstein, the chairman and CEO of the investment bank Lazard died six months agao. The May 2010 issue of VANITY FAIR has a story on Wasserstein by William Cohan, the author of a book about the history of Lazard.
It appears that Wasserstein was rushed to a hospital on Sunday, October 11, experiencing heart palpitations. According to Cohan's sources, he was put on life support immediately upon arrival, and the prognosis was always grim. It was "just a question of how long he would hang on," Cohan tells us. Death came that Wednesday, October 14.
Some of the people Wasserstein interviewed said this death was a shock, because their friend had seemed very healthy only recently. Toby Myerson said that he had seen Wasserstein at a birthday party four months before, and Wasserstein looked "healthy ... very engaged and engaging." Others, though, suggested that this was not such a surprise, because Wasserstein had been very sick (though closed-mouthed about it) for years. In February 2006, he disappeared from Lazard's offices, not returning until that May. When he did return, said an anonymous souyrce, "He was bruised all over his body. He looked like a guy who had been going through chemo or something."
Here's a link to the full story.
Two points stand out for me. One is simply that Wasserstein was (understandable) unhappy with the nickname that Forbes gave him in 1989, "Bid 'Em Up Bruce." The snap behind the nickname was that Wasserstein used "psychological bullying" to get his clients to 'win' auctions in the margers-and-acquisitions context by bidding more than made sense, more than they could really afford. Robert Campeau's 'victory' in a bidding war in which Wasserstein had advised him turned out to be especially pyrrhic.
The other, related, point is the ambiguity as to whether Wasserstein's last deal fit that bad old pattern. He advised Kraft in the early steps that led to its purchase of Cadbury. Cohan quotes Antonio Weis, head of investment banking at Lazard, who spoke up for his deceased boss on this point. "Bruce's last deal was specifically designed to acquire the target company at the lowest possible price. So it was the exact oppositre of what is alleged."
Bruce Wasserstein, RIP.
Showing posts with label Cadbury. Show all posts
Showing posts with label Cadbury. Show all posts
Monday, April 12, 2010
Wednesday, January 20, 2010
Kraft-Cadbury Concord
Kraft and Cadbury have settled on terms, with Kraft increasing its offer from about $17 billion to $19.5 billion, in a deal that is part cash purchase, part stock-swap.
Hershey had apparently been planing a white-knight offer of $17.9 -- Kraft has obviously now leapfrogged past that. This purchase price is a multiple of 13 times Cadbury's underlying 2009 EBITDA.
I don't believe I've ever defined that acronym in this blog. Just for the record, then, EBITDA means "Earnings Before Interest, Taxes, Depreciation, and Amortization."
The acronym became popular when analysts noticed that the P/E ratio could otherwise be very misleading. According to an older theory, if a corporation's stock price reflected a low ratio of market cap to earnings, the stock itself was undervalued, and a good investment. Obviously, that is a theory that runs into some difficulty given the premise that capital markets are efficient (or even not horribly inefficient) at incorporating such data. But never mind that for now.
No ... the fatal problem for the P/E ratio, as it turned out, was that the earnings number incorporated a lot of fluff in terms of distinct ways of computing amortization, etc. EBITDA, then, is the "E" part of the P/E ratio with the subjective or fluffy stuff taken out, which is supposed to be a more relevant number for purposes of comparison.
As it happens, the "price" side of the old P/E ratio has been modified too over the years for the purposes of analysis. Instead of price-to-EBITDA, one often hears about Value to EBITDA, with value defined as price (i.e. market cap) + the market value of debt. That particular refinement is a subject for another day.
We'll give the final word to Cadbury Chairman Roger Carr: "We believe the offer represents good value for Cadbury shareholders and are pleased with the commitment that Kraft Foods has made to our heritage, values and people throughout the world. We will now work with the Kraft Foods' management to ensure the continued success and growth of the business for the benefit of our customers, consumers and employees."
Hershey had apparently been planing a white-knight offer of $17.9 -- Kraft has obviously now leapfrogged past that. This purchase price is a multiple of 13 times Cadbury's underlying 2009 EBITDA.
I don't believe I've ever defined that acronym in this blog. Just for the record, then, EBITDA means "Earnings Before Interest, Taxes, Depreciation, and Amortization."
The acronym became popular when analysts noticed that the P/E ratio could otherwise be very misleading. According to an older theory, if a corporation's stock price reflected a low ratio of market cap to earnings, the stock itself was undervalued, and a good investment. Obviously, that is a theory that runs into some difficulty given the premise that capital markets are efficient (or even not horribly inefficient) at incorporating such data. But never mind that for now.
No ... the fatal problem for the P/E ratio, as it turned out, was that the earnings number incorporated a lot of fluff in terms of distinct ways of computing amortization, etc. EBITDA, then, is the "E" part of the P/E ratio with the subjective or fluffy stuff taken out, which is supposed to be a more relevant number for purposes of comparison.
As it happens, the "price" side of the old P/E ratio has been modified too over the years for the purposes of analysis. Instead of price-to-EBITDA, one often hears about Value to EBITDA, with value defined as price (i.e. market cap) + the market value of debt. That particular refinement is a subject for another day.
We'll give the final word to Cadbury Chairman Roger Carr: "We believe the offer represents good value for Cadbury shareholders and are pleased with the commitment that Kraft Foods has made to our heritage, values and people throughout the world. We will now work with the Kraft Foods' management to ensure the continued success and growth of the business for the benefit of our customers, consumers and employees."
Wednesday, January 6, 2010
Cadbury and Buffett
We noted last month that the EC had given itself until January 6 to study the issue of Krafty's desire to take over Cadbury.
That time has now run, and although I have yet to see an announcement, the general expectation is that Kraft has or will receive Phase One clearance to proceed with its takeover plan. [UPDATE: The general expectation was right. The EC is now saying that it will allow the deal if Kraft divests Cadbury's Polish and Romanian chocolate confectionary businesses.]
But the pieces on this chessboard have been in motion while the EC has been mulling over the shape of the board. Warren Buffett, of Berkshire Hathaway Inc., has weighed in, for example. Also, Kraft is selling its pizza business to Nestle, for $3.7 billion, and Nestle says it is not in the bidding for Cadbury.
I'm not sure what all this means. Buffett isn't saying that he doesn't want Kraft to make the deal, but he is saying that he opposes the issuance of new shares as a way of paying for it. And Buffett, who has a 9.4% stake in Kraft via Berkshire Hathaway, is not one to be trifled with in such matters.
Will Kraft be able to get the deal done in cash, and at the curent bid? Stay tuned, sports fans.
That time has now run, and although I have yet to see an announcement, the general expectation is that Kraft has or will receive Phase One clearance to proceed with its takeover plan. [UPDATE: The general expectation was right. The EC is now saying that it will allow the deal if Kraft divests Cadbury's Polish and Romanian chocolate confectionary businesses.]
But the pieces on this chessboard have been in motion while the EC has been mulling over the shape of the board. Warren Buffett, of Berkshire Hathaway Inc., has weighed in, for example. Also, Kraft is selling its pizza business to Nestle, for $3.7 billion, and Nestle says it is not in the bidding for Cadbury.
I'm not sure what all this means. Buffett isn't saying that he doesn't want Kraft to make the deal, but he is saying that he opposes the issuance of new shares as a way of paying for it. And Buffett, who has a 9.4% stake in Kraft via Berkshire Hathaway, is not one to be trifled with in such matters.
Will Kraft be able to get the deal done in cash, and at the curent bid? Stay tuned, sports fans.
Sunday, December 13, 2009
Three brief items
Let us update three matters that we've left dangling.
1. Cisco and Tandberg. On Wednesday, December 2, I wrote here that Cisco Systems had extended the offer period in its effort to acquire Tandberg, a Norway based company.
Apparently, Cisco soon thereafter won its prize. That link will also give you a tick-tock on the whole courtship.
2. Cadbury. This one is still up in the air. The relevant trade union is unhappy with the idea of Kraft taking over. On the other hand, Kraft's interest has attracted other bidders, and it seems likely Cadbury will lose its independence to somebody, although the question "to whom?" remains unanswered.
The European Commission has given itself until January 6 to study the matter.
3. MRV Communications. Back in early October I told you that MRV, the California based networking-ethernet company, was going to hold an annual shareholder meeting on November 11, and it would face a proxy challenge at that time. So ... what happened?
The two sides kissed and made up, that's what. Spencer Capital secured an agreement from the company that three of the board members would resign on the day of the annual meeting: Furchtgott-Roth, Jaensch, and Tsui. In return, Lotan, Margalit, Fischer, Herman, Keane, and Shidlovsky would all be re-elected without opposition. So there are three new faces on the board: Charles M. Gillman, Michael J. McConnell and Kenneth H. Shubin Stein.
Intriguingly, one of the three winners who has been put out to pasture in this way, Daniel Tsui, won the Nobel Prize in Physics in 1998, for the discovery of "a new form of quantum fluid with fractionally charged excitations,"
1. Cisco and Tandberg. On Wednesday, December 2, I wrote here that Cisco Systems had extended the offer period in its effort to acquire Tandberg, a Norway based company.
Apparently, Cisco soon thereafter won its prize. That link will also give you a tick-tock on the whole courtship.
2. Cadbury. This one is still up in the air. The relevant trade union is unhappy with the idea of Kraft taking over. On the other hand, Kraft's interest has attracted other bidders, and it seems likely Cadbury will lose its independence to somebody, although the question "to whom?" remains unanswered.
The European Commission has given itself until January 6 to study the matter.
3. MRV Communications. Back in early October I told you that MRV, the California based networking-ethernet company, was going to hold an annual shareholder meeting on November 11, and it would face a proxy challenge at that time. So ... what happened?
The two sides kissed and made up, that's what. Spencer Capital secured an agreement from the company that three of the board members would resign on the day of the annual meeting: Furchtgott-Roth, Jaensch, and Tsui. In return, Lotan, Margalit, Fischer, Herman, Keane, and Shidlovsky would all be re-elected without opposition. So there are three new faces on the board: Charles M. Gillman, Michael J. McConnell and Kenneth H. Shubin Stein.
Intriguingly, one of the three winners who has been put out to pasture in this way, Daniel Tsui, won the Nobel Prize in Physics in 1998, for the discovery of "a new form of quantum fluid with fractionally charged excitations,"
Sunday, November 22, 2009
Cadbury and Shareholder Democracy
The argument in favor of shareholder democracy (and the argument in favor of making the expression of this democracy ever more direct) has long been that the owners of equity are the residual risk-holders of the company, and that as such they ought to be making the decisions on which those risks turn.
Why is it so much easier, so much more common, to be nervous as a passenger on an airplane than to be nervous driving one's own car? The latter is more dangerous, but while driving the car you feel that you are in control of your fate, whereas while a passenger on a plane (or a bus for that matter) a perfect stranger has control of your fate. Owners of equity naturally want to drive the car.
One of the counter-arguments to shareholder democracy, or any very direct expression thereof, is that many of the shareholders have a very short-term perspective. They don't intend to maintain the car properly, so to speak, because they plan to sell their interest in it after one quick trip. Managers and directors with a more long-term perspective are to be trusted. As are the institutional investors typically in for the long haul, like pension fund managers.
These theories and arguments collide directly in the emerging bidding war for Cadbury. Look for example, at a story Andrew Ross Sorkin of The New York Times recently published, "Do Stockholders Really Know What's Best?".
The money quote from Sorkin, "Indeed, one parlor game in London has been to guess how much of Cadbury’s long-term shareholder base has already sold out to arbitrageurs, whose goal is to see the company sold as quickly as possible and then move on to another deal .... People involved in the deal estimate that about a third of the shares have already changed hands, moving from long-term shareholders to hedge funds. Those funds, said Joseph Grundfest, a professor at Stanford Law School, 'have a long-term time horizon of about 12 minutes.'"
Frankly, such an appeal leaves me cold. After all, every completed transaction has two parties. These short-termers have bought up a lot of stock from the institutions with longer-term horizons that used to hold it, you say? Why have those institutions sold it? Because, in whatever temporal horizon interests them, some other investment looked better, right? They sold to get the cash to put that cash somewhere else.
When and why did Cadbury cease to be an attractive place to have their assets for those long-termers? We can hardly blame that on the short termers who (this is inherent in this diagramming of the situation) hadn't bought yet.
I don't know what Cadbury's fate is going to be. But it seems to me that arguing that it ought to remain an independent company forever because that is the long-term best thing to do, because only short-termers buy stock is just ... well, silly. People who 'reason' that way should put the chocolate down and try some brain food.
Why is it so much easier, so much more common, to be nervous as a passenger on an airplane than to be nervous driving one's own car? The latter is more dangerous, but while driving the car you feel that you are in control of your fate, whereas while a passenger on a plane (or a bus for that matter) a perfect stranger has control of your fate. Owners of equity naturally want to drive the car.
One of the counter-arguments to shareholder democracy, or any very direct expression thereof, is that many of the shareholders have a very short-term perspective. They don't intend to maintain the car properly, so to speak, because they plan to sell their interest in it after one quick trip. Managers and directors with a more long-term perspective are to be trusted. As are the institutional investors typically in for the long haul, like pension fund managers.
These theories and arguments collide directly in the emerging bidding war for Cadbury. Look for example, at a story Andrew Ross Sorkin of The New York Times recently published, "Do Stockholders Really Know What's Best?".
The money quote from Sorkin, "Indeed, one parlor game in London has been to guess how much of Cadbury’s long-term shareholder base has already sold out to arbitrageurs, whose goal is to see the company sold as quickly as possible and then move on to another deal .... People involved in the deal estimate that about a third of the shares have already changed hands, moving from long-term shareholders to hedge funds. Those funds, said Joseph Grundfest, a professor at Stanford Law School, 'have a long-term time horizon of about 12 minutes.'"
Frankly, such an appeal leaves me cold. After all, every completed transaction has two parties. These short-termers have bought up a lot of stock from the institutions with longer-term horizons that used to hold it, you say? Why have those institutions sold it? Because, in whatever temporal horizon interests them, some other investment looked better, right? They sold to get the cash to put that cash somewhere else.
When and why did Cadbury cease to be an attractive place to have their assets for those long-termers? We can hardly blame that on the short termers who (this is inherent in this diagramming of the situation) hadn't bought yet.
I don't know what Cadbury's fate is going to be. But it seems to me that arguing that it ought to remain an independent company forever because that is the long-term best thing to do, because only short-termers buy stock is just ... well, silly. People who 'reason' that way should put the chocolate down and try some brain food.
Wednesday, November 11, 2009
Some poetry
I've learned the real truth about the Kraft/Cadbury shenanigans.
It seems that Cadbury is actually run by a very eccentric genius named Willy Cadbury, who looks a lot like Gene Wilder. He wants to retire, so he held a contest involving golden tickets.
Kraft won the contest, but now Cadbury wants to pull out of the deal, because the Oompa-Loompas have warned him against the Kraft fellow, in a song that goes something like this.
Oompa-Loompa Dumpety daft
We won't work for this here guy Kraft.
Oompa-Loompa Doopety Doo
If you weren't crazy we'd clobber you.
What will we get will you listen now please?
Nothing but their Macaroni and Cheese.
Whose is the stock that we're going to swap?
It tastes no good without ... cream on top.
Oompa-Loompa Doopety Broom,
If you are wise you'll hide in your room.
Oompa-Loompa Dipedy Daft,
We'll have an ambush ready for Kraft.
It seems that Cadbury is actually run by a very eccentric genius named Willy Cadbury, who looks a lot like Gene Wilder. He wants to retire, so he held a contest involving golden tickets.
Kraft won the contest, but now Cadbury wants to pull out of the deal, because the Oompa-Loompas have warned him against the Kraft fellow, in a song that goes something like this.
Oompa-Loompa Dumpety daft
We won't work for this here guy Kraft.
Oompa-Loompa Doopety Doo
If you weren't crazy we'd clobber you.
What will we get will you listen now please?
Nothing but their Macaroni and Cheese.
Whose is the stock that we're going to swap?
It tastes no good without ... cream on top.
Oompa-Loompa Doopety Broom,
If you are wise you'll hide in your room.
Oompa-Loompa Dipedy Daft,
We'll have an ambush ready for Kraft.
Tuesday, November 3, 2009
Kraft and Cadbury, continued
I'll just do some quick link farming today, to catch us up on Kraft/Cadbury matters.
An analyst's note from Merrill Lynch says: "The third quarter offers Kraft a chance to demonstrate that 'old Kraft' is continuing to turn the corner before potentially pairing up with Cadbury.
But there is no luxury of time. Under the Takeover Panel's deadline, Kraft must make an offer by the end of the business day on November 9 or walk away for six months.
Kraft will report those third-quarter reports later today. Here is a preview.
Kraft's transaction info is here.
And Cadbury's response? voila!.
An analyst's note from Merrill Lynch says: "The third quarter offers Kraft a chance to demonstrate that 'old Kraft' is continuing to turn the corner before potentially pairing up with Cadbury.
But there is no luxury of time. Under the Takeover Panel's deadline, Kraft must make an offer by the end of the business day on November 9 or walk away for six months.
Kraft will report those third-quarter reports later today. Here is a preview.
Kraft's transaction info is here.
And Cadbury's response? voila!.
Tuesday, September 8, 2009
Cadbury and Kraft
Kraft Foods has offered to buy the famous confectioner Cadbury PLC in a part cash, part stock swap deal valued at $16.73 billion (which is 10.13 billion GBP).
Cadbury's management has rejected the offer, saying that it "fundamentally undervalues" the company -- which strikes me as an odd thing to say, since the offer is at a 31% premium on the closing share price of Cadbury Friday.
Trian Fund Management, a hedge fund manager controlled by Nelson Peltz, owns 3.5% of Cadbury, a stake Peltz accumulated back in 2007, and Trian has played a big role -- bigger than the size of that stake would indicate -- in Cadbury's management decisions before, notably in pressing for the spin-off of the Dr. Pepper softdrinks business.
Trian also, intriguingly, owns a stake in the suitor company in this scenario, Kraft. There, too, it has played an activist role, getting two Peltz-approved independent directors on the Kraft board in November 2007.
My guess, then, is that we will be hearing from Peltz if this turns into a protracted struggle for control of the chocolatier.
Cadbury's management has rejected the offer, saying that it "fundamentally undervalues" the company -- which strikes me as an odd thing to say, since the offer is at a 31% premium on the closing share price of Cadbury Friday.
Trian Fund Management, a hedge fund manager controlled by Nelson Peltz, owns 3.5% of Cadbury, a stake Peltz accumulated back in 2007, and Trian has played a big role -- bigger than the size of that stake would indicate -- in Cadbury's management decisions before, notably in pressing for the spin-off of the Dr. Pepper softdrinks business.
Trian also, intriguingly, owns a stake in the suitor company in this scenario, Kraft. There, too, it has played an activist role, getting two Peltz-approved independent directors on the Kraft board in November 2007.
My guess, then, is that we will be hearing from Peltz if this turns into a protracted struggle for control of the chocolatier.
Subscribe to:
Posts (Atom)
