• DECEMBER 11, 2001

Cadbury's open offer

Cadbury Schweppes Plc (Cadbury India's parent) has made a voluntary offer to the shareholders of Cadbury India to acquire up to 17.5 m equity shares of Rs 10 each, representing 49% of the company's equity capital, at the price of Rs 500 per share.

Cadbury Schweppes holds the remaining 51% stake in Cadbury India. The offer is scheduled to open on January 24, 2002 and close on February 22, 2002. The record date for this offer has been fixed as December 13, 2001.

It should be noted that the Cadbury management had earlier indicated that they plan to take the Indian subsidiary private. The Cadbury stock price has gained 25% in the last one month to Rs 484, owing to this announcement.

It is unlikely that Cadbury India would manage to attract the entire 49% shareholding with this offer, as the price offered is hardly at a 3% premium to the prevailing market price. However, the offer price is at a 24% premium to compared to the 26 week average of the closing high-low price quoted on the bourses. Despite this, owing to Cadbury India's dominant postion in the Indian chocolate market, Indian shareholders may not want to let go of this gravy train so easily.

At the offer price of Rs 500, the stock's P/E stands at 31x projected FY02 earnings and at 27x FY03E earnings.

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