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Early Tuesday morning, Kraft Foods (KFT) announced that it is going to sell its North American pizza business for $3.7 billion. And of course, the natural purchaser of the pizza business is Nestle -- wait a sec ... What does Nestle want with KFT's frozen pizza business? Well, in case you didn't know it, Nestle already holds the Stouffer's, Lean Cuisine, Buitoni, Hot Pockets, and Lean Pockets brands. The Swiss company will now add DiGiorno, Tombstone, California Pizza Kitchen, Jack's, and Delissio brands to its prepared dishes lineup. This addition is a major coup for Nestle, as its presence in the prepared-food world was already substantial -- and is now downright formidable. I would have to say that this is $3.7 billion well spent by Nestle.
On the other hand, what is KFT going to do with the additional $3.7 billion? Well, it seems that KFT is going to up its bid for Cadbury. This morning, Nestle announced that it was out of the running for Cadbury -- prompting one analyst to note that "Kraft has effectively bought Nestle's silence in the bid process by selling them a growth business at what one must presume is an attractive price." KFT did state that it will not increase the overall value of its offer for Cadbury, but noted that it would lift the cash element of the bid by roughly 60 pence per share.
While some may like this attempted purchase by KFT, Cadbury does not. Cadbury continues to insist that it will reject KFT's offer because it is "wholly inadequate" and the changes to the company's bid were little more than "tinkering." In fact, Cadbury insists that KFT is trying to "steal" the company. It sure seems to me that KFT is wasting time trying to sweeten its bid for the chocolate company.
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