Improvisation in the midst of a fast-changing takeover battle can be critical to the art of deal making. But rarely has a bank had to respond quickly in a crisis the way Lazard did while advising Kraft Foods on its hostile bid for British confectioner Cadbury. Lazard’s legendary leader, Bruce Wasserstein, had overshadowed dozens of other bankers involved in the heated contest. He played a pivotal role in devising takeover strategy and pricing with Kraft CEO Irene Rosenfeld, notably insisting that the company hold off on increasing its offer for as long as possible. Tragically, however, Wasserstein died suddenly at the height of the negotiations after being hospitalized with an irregular heartbeat.
Lazard’s deep bench of seasoned bankers on both sides of the Atlantic stepped in to fill the void. The team included New York–based head of investment banking Antonio Weiss; Lazard’s London CEO, William Rucker; and London-based managing director Peter Kiernan. The trio smoothly navigated the deal’s late stages and ensured that Lazard remained the sole lead financial adviser to Northfield, Illinois–based Kraft.
For the 44-year-old Weiss, whose specialty is cross-border deals, the takeover was unrivaled in its complexity. “It was unprecedented to use that much stock in a cross-border transaction of this sort,” he says. “Stock was 60 percent in the initial approach.” (It subsequently fell to 40 percent.)
Differing regulatory frameworks also made things tricky. Two weeks before Wasserstein’s death on October 14, 2009, Britain’s Panel on Takeovers and Mergers set a November 9 deadline for Kraft’s formal bid. In contrast to the U.S., U.K. takeover rules don’t typically allow any financing contingency. In addition, a buyer cannot retract a formal offer, and British boards are forbidden to deploy so-called poison pills (whereby the target company issues more shares) or sue to stop a takeover. Racing against time, Weiss and his team also had to deal with an unhappy public and sensitive politics.
The results showed the brilliance of their strategy and its flawless execution. On January 19, after almost five months of resistance, Cadbury’s board recommended that shareholders accept Kraft’s final offer. The deal valued Cadbury shares at 840 pence ($13.20), up from the initial offer of 755 pence. That price was 12.9 times 2009 ebitda, less than the 13.6 multiple Kraft paid for Groupe Danone’s biscuit business in 2007 and far below Mars’s 19.3 multiple for its 2008 acquisition of Wm. Wrigley Jr. Co. “The tactics were specifically designed to acquire the company at the lowest possible price,” says Weiss, referring to the deal’s unsolicited nature. “Kraft succeeded by sticking to its initial path.”
