Kraft-Cadbury and Glencore-Xstrata Acquisition - Assignment Example

Introduction

Cadbury is a British company that dealt in the production and distribution of confectionery. The company has created a brand name in the global arena because of the production of quality products. Apparently, the country operates in over fifty countries across the globe. The main line of production revolves around the chocolates. Most consumers identify the company with the production of the fresh dairy chocolates. Kraft Foods is a processing and manufacturing company located in the United States. Recently, the company changed its name to Mondelez International. The company is now known to have acquired Cadbury at a price. The recent acquisition has been a subject of debate. Glencore is a Swiss company that deals in the activities such as mining. The company is widely known for the recent merger it made with Xstrata Company. The essay discusses the acquisitions and mergers made by the companies in detail.

Kraft-Cadbury Acquisition

The Kraft-Cadbury acquisition has become a subject of debate owing to the method of acquisition that was applied. Apparently, Cadbury had a perfect market performance, and the company had acquired a global appeal. Cadbury had a good market share in the food industry become of the production of quality products. The factor made the company be placed on the market for sale. On the other hand, Kraft had a deep interest in the company because it needed to expand its market shares in emerging markets in Asia (Bailey & Clancy 2010, p. 112). India provided a perfect destination for the company owing to the competitive advantages the country had. Kraft had made an initial bid for the company that was met with a lot of resistance. The issue took place because the current position of the company could not allow it to be sold.

The chairperson of the British multination corporation had a good experience in the defense against a takeover. This created an advantage for the British company because any attempts made by Kraft met up with great resistance. The chairperson had placed a defense advisory team that placed a good resistance to Kraft. The first action the company took was to establish the 745 share over and place it as unattractive. The team explained that the share could undervalue the company (ACCA 2010). Apparently, the team placed up clear indications if the company would be available to purchase companies such as Nestles and Ferrero would be able to acquire it. The British government made clear indications that the company would oppose any effort for companies that lack respect to purchase it. The defense documents provided explained that shareholders had refused the offer by Kraft because of business operating models.

Glencore-Xstrata Acquisition

The Glencore take over at Xstrata has also been a subject of debate owing to the manner in which the merger took place. At first, the two companies were to form, an equal merger that would enable them to expand and grow. Glencore had previously announced it would form a merger with Xstrata, but the event turned out to be a complete take over between the two main companies. The activity leads to the raising of legal questions over the manner in which the company was acquired (Scott 2013). By looking at the case in details, the battle for shares leads to the effective acquisition of the company even after the rise of the shares price. In conclusion, the takeover of Xstrata is a subject of debate amongst many business experts.

Similarities

The two major acquisitions had major similarities owing to the methods in which the takeovers took place. Apparently, the acquisitions took place when the companies were not available for sale. This creates major similarities between the acquisitions. Previously, Kraft food had made a move for the purchase of Cadbury back in 2009. The action was quite difficult owing to the level of resistance that they met from the management. The action was further crippled by the fact that Cadbury was not available for purchase for the American company (Tappin & Cave 2010, p. 141). On the other hand, Glencore and Xstrata had an initial agreement of forming an equal merger. The action resulted in a battle that made Glencore gain the full acquisition of the company. Ideally, the similarities explain the initial motives of Glencore and Kraft foods. The two company’s motive also creates a similarity between the two.

Differences

Kraft foods and Glencore key differences come in the method of acquisition. Kraft food had made it clear that it wanted of purchase Cadbury owing to the current market trend that dictated the expansion of its market. Cadbury’s management was quite aware of the action taken by Kraft and had drafted a move that aimed at blocking the action that the American action as taking against it. On the other hand, Xstrata was quite unaware of Glencore intentions to take over the company (Chaudhry 2015, p. 114). The actions taken by the company came as a surprise to the management. The plan to form mergers immediately changed into full take over after effective negotiation between the two companies. Ideally, the motives and the methods of acquisitions clearly spell out the differences between the two major acquisitions in the corporate world.

Similarities in financing methods

Kraft made a bid for Cadbury in 2009. The bid was around $16.2billion. The offer was rejected immediately. The key reason for the rejection is that the offer is clearly undervalued the value of Cadbury owing to the market share the company has in possession. The action resulted in warnings being given to the company from the British government owing to the acquisition techniques applied by the company. The action resulted in the purchase of shares that foresaw the sale of the company to the American company (Bruner 2013, p. 139). It reached a deal with the sale of 8.40 pound per share. The action resulted in the complete acquisition of the company by the American company. This creates a clear similarity in the financing move made by Glencore to Xstrata. Glencore purchased Xstrata through the means of shares. The acquisition amounted to a total of $41billion.

Differences in financing methods

The differences between the financing methods of the acquisitions come in term of the initial offers. Kraft had made a bid for Cadbury, but Cadbury was not on sale. The action explains that the clear motives of Kraft were to come up with a negotiation that would result in agreement. The action succeeded in meeting up with great resistance from the management of Cadbury. On the other hand, Glencore had placed a bid for the Xstrata Company of 2.8 shares. After effective negotiations, it resulted in the sale of a significant three shares (Elliott et al. 2015, p. 113). The manner in which the negotiations were derived creates the key differences in the financing methods of the two key acquisitions that took place. The event explains the manner in which the companies could be managed without difficulty. In conclusion, the financing methods have explicit differences.

Impact on management

The acquisition of the company would lead to a change in the management structure of the company. The manager would have to adopt the new strategic changes implored by the acquirer. The action may result in the creation of more managerial duties owing to the fact that the operation of the company may expand to other levels. The activity may dictate the coordination and corporation between the manager and other departments. This is because the activity may result in the creation of more duties and roles (Faulkner et al. 2012, p. 144). Ideally, the manager has to be flexible with the changes that are expected to take place after the acquisition has taken place. In most cases, the action usually results in the loss of specified duties and changes in the daily schedule as the acquirer may come up with an entirely different business model that may dictate the manager to be flexible.

Impact on shareholders

The acquisition usually has positive implications for the team of shareholders. The activity takes place because the shareholder is likely to get more profits after the audition of the company. The action may take place because of the initial purchase of the shares may make them gain more. The activity also results in the loss of shares by minor shareholders owing to the reality that some shares need to be sold. The activities results in the creation of overall profits that results in shareholders benefiting from the whole set of activities (Grant 2016, p. 144). As long as the name of the company does not change and the quality of the product does not reduce. The company is most likely to operate at a profit because of customer loyalty. Most customers would continue purchasing the services and products of the company owing to the level of profits made.

Impact on customers/competition and regulatory measures

The acquired company is most likely to expand in the market. This is because it faces the opportunity of having more finances to expand and come up with market penetration strategies. Ideally, both the acquired and acquirer company has a competitive advantage in the dominant industry. This is because of the sharing of ideas, and the market may lead to the generation of more profits that may work for the benefit of both companies in the end. The combination and integration of the administrative system also work for the benefit of the company in the end (Geological Survey 2013, p. 134). This is because the action may result in the creation of profits that aim at dominating the equal level of profits that the competitors have over the dominant industry. Lastly, the regulatory implication enables the company to operate by their coordinative principles.

What are the various Post Bid Defenses that a target company can employ to repel a bid

The defenses placed by Cadbury ensured that the company shareholders would be the key beneficiary of the activities because they are the owners. In an attempt to protect the shareholders, the company ensured that the shareholders could sell at a fair price of 830 pence per share. The action would result in the creation of a profit even if the company was eventually sold out to the acquirer. Ideally, the activity results in the mutual benefits of all teams. Cadbury chair ensured that the company had struck a fair deal with the acquirer to avoid future disagreements (Tappin & Cave 2010, p. 126). On the other hand, Xstrata ensured that it had struck a fair deal with the other Glencore before forming a major deal. The action resulted in the fair sale of share. Therefore, the creation of fair deals is a perfect way of dealing with such issues.

To what extent were the bad defenses used in each deal successfully?

The bid defenses placed by the Cadbury worked for the benefit of the shareholder and the employee of the company. Kraft insisted that it would safeguard and retain the rights of Cadbury employees before striking a deal with the company. Before selling the company out, the chairperson ensured that the company had reached a fair deal with Kraft. The action resulted in the firm selling of the shares. The sale of the shares resulted in the company generating extra profits from the whole set of activities. The sale of eight pounds per share worked for the benefit of the shareholder as each one of them managed to generate extra profit from the activity. Additionally, the defense strategy placed by Xstrata worked for the benefit of the company owing to the financial agreement that the management reached with Glencore. The activity resulted in the generation of extra profit that formed a utility concept that facilitated the key shareholders of Xstrata to benefit from the whole ordeal.

Research into what has happened to the companies since the Acquisitions occurred, and whether the corporate financial strategy adopted for the deal has proven to be appropriate

Cadbury has worked at a profit ever since its acquisition. The action has made the company expand its key activities to over fifty countries across the globe. The available funds [provided by Kraft Foods facilitates the company to produce a variety of products that suit the market needs. Kraft ensured that the market base of the company in the United States expanded. This is because of the vast market knowledge the company has in possession. The factor enables the company to make an operating income of 559.4 pounds in the year 2011 alone (Breiding 2012, p. 155). This explains the level of profits the company makes after it acquisition by Kraft foods. Ideally, the acquisition of the company has worked for the benefit of its operations in the global arena.

The acquisition of Xstrata has proved beneficial for the multinational corporation. Its mining activities in various part of the world have greatly expanded owing to the available funds provided by the parent company. Employees of Xstrata have given out a positive response to the level of profits the company has managed to create over the past few years. The factor has made the earnings of the employees to rise. This has led to an increase in the productive level owing to employee satisfaction (Galpin & Herndon 2014, p. 151). The operations of the Swiss company have expanded to other countries such as South Africa. Research indicates that Glencore level of income is increased by a significant 7%. The combined market revenues of the two companies $90billion. The action explains the mutual benefits accrued from the acquisition.

Conclusion

Glencore is a Swiss corporation that deals in the activities such as mining. The business is widely known for the recent fusion it made with Xstrata Company. Cadbury is a British company that dealt in the production and distribution of confectionery. Kraft made a bid for Cadbury in 2009. The bid was around $16.2billion. The offer was rejected immediately. The acquisition of the company would lead to a change in the management structure of the company. The manager would have to adopt the new strategic changes implored by the acquirer. The defenses placed by Cadbury ensured that the company shareholders would be the key recipient from the activities because they are the owners. The acquired corporation is most likely to expand in the market. This is because it faces the opportunity of having more finances to expand and come up with market diffusion plans.