weiwentg (98.30)

Deal musings: Novartis/Alcon and Kraft/Cadbury

January 05, 2010 – Comments (1) | RELATED TICKERS: NVS , KRFT

I usually dislike large acquisitions, but Novartis already owned most of Alcon. Alcon has a very attractive business. Novartis is pretty likely to get Alcon and doesn't seem to be overpaying - they can leverage the fact that they will own the majority of the company after acquiring Nestle's stake. However, as with most stocks of potential acquirers, Novartis' stock has dropped several percent in the last two days. I think this is a good time to buy.

 As for Cadbury, it seems that Warren Buffett has now spoken publicly against Kraft's acquisition of Cadbury. I thought Kraft was paying too much. It seems Buffett agrees and is sufficiently aggravated to say so in public, which is rare for him. Cadbury has attractive enough assets, but Kraft was paying way too much. If they had been able to get Cadbury at a reasonable price - not a penny over the initial offer and preferably less - and assuming they had been able to integrate Cadbury properly, this would have been a transformative deal. however, I think Kraft would have put way too much strain on its balance sheet.