Kraft Case Study

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Can Kraft be bought by some other company? Once the proxy statement is released by Kraft, it will become known if the company ran some process to sell the company. If it did, then there is a very less chance for another buyer to come in at this point of time. If the company did not run a process then there is a possibility that there might be some other company interested in buying Kraft. There are very few companies that are comparable in size to Kraft to initiate its buying. Possibilities can be seen limited to Nestle, Coca-Cola and PepsiCo. Mondelez is an unlikely partner as it used to be a part of Kraft. Few firms would like to bid against Berkshire Hathaway so that is also ruled out. Also, Kraft is trading at a premium if its multiples are observed – 16.9x expected 2016 EBITDA with no synergies assumed. Thus any buyer would have to buy Kraft at a high price which may not prove so beneficial for the acquiring company whereas Berkshire Hathaway has the perfect company to merge Kraft with. A breakup fee of $1.2 billion will be charged from Kraft incase the merger does not take place due to the emergence of a new bidder who outbids the previous bid. One major deal breaker can be the US Antitrust Law. Under this law, following items are restricted:  Formation of cartels and other collusive practices which can be regarded as being restraint of trade  Restrict M&A deals that could substantially lessen competition  Prohibit creation of monopoly and the abuse of such power

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