Kraft and Nestle Switching? Kraft Plans Cadbury Takeover

Pizza for chocolate

Image from Flickr.

Image from Flickr.

When I think of Kraft, the first thing I think of is cheese. Kraft Singles, macaroni and cheese and all kinds of savory, cheesy things come to mind when I hear “Kraft.” So it came as no surprise to me to find out that Kraft owns frozen pizza brands DiGiorno and Tombstone as well the California Pizza Kitchen trademark license.

It did, however, come as a surprise that Kraft sold the whole lot today to Nestle. Of course, when I think Nestle, I think chocolate chips. Why would Kraft do such a thing? According to MarketWatch, to raise money for orchestrating a hostile takeover of Cadbury, another big name in chocolate.

Pizza profits

It might have been smarter for Kraft to hit up a loan company to get the funds for the Cadbury takeover. Their pizza business pulled in an estimated $1.6 billion last year. So it makes sense that Nestle would snap it up. DiGiorno sales alone have jumped 20 percent in the last two quarters. I don’t have to remind you that the last two quarters have been a financial catastrophe for the majority of companies.

I can understand Nestle wanting to add pizza to its repertoire of goods as it continues to sell chocolate, but why would any individual or company of sound mind give up pizza? I wouldn’t even do that for a week.

No sweet surrender

I am sure Kraft has its reasons for wanting to orchestrate a hostile takeover of Cadbury, but so far it hasn’t explained itself. Also, ditching its pizza business may turn out to be all for naught, as the attempt has already hit a roadblock today. MarketWatch says:

Warren Buffett’s Berkshire Hathaway Inc. voted against a proposal to fund the deal by issuing millions of new shares. Berkshire controls 9.4% of Kraft’s shares.

All I can say is “enjoy your awesome new profits, Nestle,” and “good luck, Kraft. Don’t sell your pre-sliced cheese division or stop making spiral macaroni.”

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