LeaderShift Blog

Cadbury back in play with Kraft $16.73 Billion Bid

Hershey Co. is unlikely to stand by and let Kraft Foods Inc. or another company swallow up chocolate rival Cadbury PLC, a person familiar with Hershey's thinking said Monday.

"Hershey recognizes that Cadbury is the last major confectionery company potentially available and, as such, is likely to make some response" to Kraft's $16.73 billion bid for Cadbury PLC, this person said.

What form that response could take is unclear, but Hershey and Cadbury have been through serious flirtations in the past.

Hershey, with a market cap of about $8.8 billion, could have a difficult time financing such a deal. Cadbury's market cap, after shooting up Monday, is roughly $17.5 billion.

One potential option would be for Hershey to team with Nestle SA, the Swiss food giant, to make a joint bid in which Nestle would take Cadbury's gum business and Hershey would take chocolate. It is unknown whether Nestle and Hershey have been in talks.

At a media event on Monday, Nestle Chief Executive Paul Bulcke said the company is always "open to acquisition opportunities if they fit strategically."

Brazilians Bid of U.S. Meat Titan Pilgrim’s Pride

Brazilian beef giant JBS SA is set to announce as soon as next week the acquisition of Texas-based Pilgrim's Pride Corp. for a price of roughly $2.5 billion, say people familiar with the matter. The deal would pull the second-largest chicken company in the U.S. out of bankruptcy court and shake up the global meat business.

If the JBS deal for Pilgrim's Pride advances, the new company would create a stronger rival to Tyson Foods. Above, the Brazil company called itself 'The world's largest meat producer' after it acquired Swift & Co. in 2007.

The deal was in the final stages of negotiation Wednesday and could fall apart. But if it moves ahead as expected, it would create a new US. rival to Tyson Foods Inc., the biggest U.S. meat company that produces beef, chicken and pork. Combined, Pilgrim's Pride and JBS's U.S. unit -- which includes sales at the JBS business in Australia -- would have posted about $20 billion in revenue last year. Tyson's fiscal 2008 revenue was $27 billion.

A JBS-Pilgrim deal would probably attract scrutiny from U.S. antitrust enforcers, who have said they plan to take a hard look at competition in the agriculture business. Any deal is sure to raise concerns across U.S. farm country. Some ranchers and chicken farmers are worried that greater concentration in the industry could decrease their power in the market and translate into lower prices for their animals in the long run.

Representatives for JBS and Pilgrim's declined to comment.

JBS, while not a household name in the U.S., is one of the world's largest meat producers and for years has been on a global acquisition binge designed to make it the biggest.

Until now, JBS has largely confined itself to red meat, including pork. Its core business involves buying live animals from ranchers and feedlot operators, slaughtering them and turning them into meat products that it sells world-wide. In contrast, Pilgrim's Pride is solely in the poultry business. Last year Pilgrim's Pride and Tyson each held about 22% of the U.S. market. A Tyson spokesman declined to comment.

The potential transaction adds to a busy week for deal-making. On Monday, Walt Disney Co. announced the $4 billion purchase of Marvel Entertainment Inc. and Baker Hughes Inc. purchased oil-field-services company BJ Services Co. for $5.5 billion. Tuesday eBay Inc. announced the sale of a 65% stake in the Skype Internet-phone business to private investors for $2 billion.

The move by JBS comes as people are eating fewer meals in restaurants, lowering demand for beef, chicken and pork. The drop in demand, combined with high animal-feed prices, helped push Pilgrim's Pride into bankruptcy court in December of last year.

In the short run, a deal could keep prices low at the grocery store, especially if JBS raises production of chicken. But opponents of industry consolidation fear that the meat giants will have the leverage to raise prices.

The deal would be notable, because Pilgrim's Pride's banks and bond holders will likely be paid in full -- a rarity in bankruptcy court and a bonus for distressed-debt investors who paid five to 15 cents on the dollar for the bonds last year.

There will also likely be money for the company's shareholders -- another infrequent event in bankruptcy court, where shareholders are typically wiped out. That could salvage some of the fortune of the company's former chief executive, Lonnie "Bo" Pilgrim, who helped found the Pittsburg, Texas-based company with his brother out of a ramshackle animal feed shop in the 1940s.

Under the current proposal, JBS will make a "stalking horse" bid, in which it will be in the lead to acquire Pilgrim's Pride, though other bidders could later make competing offers, the people familiar with the matter said.

In all, the offer could top $2.5 billion, according to a person familiar with the matter. It would pay off $1.2 billion in secured debt, about $1 billion in unsecured debt, accrued interest for the debtholders, and leave a "couple hundred million" for shareholders. Pilgrim's stock closed Wednesday at $5.15, giving the company a market value of $360 million.

Investors that specialize in the securities of troubled companies have been anticipating a payoff at Pilgrim's Pride. A drop in corn prices, a major cost in the feeding of chickens, has helped the company. The company turned a small profit in the third quarter of 2009 after a small loss in the same period of 2008.

The deal underscores the prevailing trend in mergers and acquisitions. Traditional deals have been sparse, yet distressed deals related to bankruptcies or restructurings have been abundant. More than 140 such deals have been struck this year, compared with 102 for all of 2008, according to data provider Dealogic.

The deal also shows again how big companies like JBS can use the downturn to get stronger by buying up weaker rivals on the cheap. JBS's deal isn't conditioned on financing, according to one person familiar with the matter.

Last year, JBS acquired Smithfield Beef, a U.S. beef processor, from Smithfield Foods Inc. In February, JBS canceled its plans to acquire National Beef Packing Co., a Kansas City, Mo., processor, after the deal was challenged on antitrust grounds by the Justice Department and 13 states.

In 2007, the company bought Swift & Co., a U.S. meat company that traced its roots to the 19th century, for $225 million plus the assumption of $1.23 billion in debt.

P&G Taps Melanie Healey to Lead North American Unit

Warner Chilcott Is Set to Buy P&G's Prescription Drug Unit for $3 Billion

Specialty drug maker Warner Chilcott Ltd. is expected to announce as early as Monday the acquisition of Procter & Gamble Co.'s prescription-drug business for more than $3 billion, say people familiar with the matter, a sign that the market for loans on more highly levered deals may be loosening.

Six banks, led by J.P. Morgan Chase & Co. and Bank of America Corp. and including Credit Suisse Group AG, Citigroup Inc., Barclays PLC and Morgan Stanley, are expected to put up as much as $4 billion in financing for the transaction. Roughly $3 billion will go toward the acquisition, with the remainder refinancing $1 billion in existing Warner Chilcott debt.

This would be the fourth-largest "leveraged loan" of 2009 in the U.S. and the largest globally for an acquisition, according to data provided by Dealogic. The last leveraged loan of this size for a deal in the U.S. was in April 2008, when Mars Inc. announced its planned purchase of Wrigley.

A leveraged loan is typically defined as a loan made to a borrower with a credit rating below investment-grade or that already carries a good amount of debt.

The deal is one of the larger transactions in a weak summer market for acquisitions. But perhaps its biggest impact will be on the dormant markets for deal financing, which has been largely shut since the mid-September 2008 collapse of Lehman Brothers Holdings Inc. Financing for deals have lately been mostly limited to big companies with strong credit ratings. None of the banks wanted to underwrite this deal alone, but "no bank wanted to miss out," said one person familiar with the matter.

The banks are in part attracted to the transaction because they can demand higher underwriting fees than during the last big deal-making cycle in the middle of the decade, said one person familiar with the deal.

Warner Chilcott is able to absorb those fees because interest rates remain historically low, which keeps the company's overall borrowing costs down despite the banks' additional charges.

Cerberus Capital Management LP and rival drug-maker Forest Laboratories Inc. also were interested in the business, said the people familiar with the matter. But Warner was able to produce the best bid for the Ohio-based unit, which will be run as a wholly owned subsidiary of New Jersey-based Warner.

A key issue in the talks, said these people, was a patent-dispute lawsuit between P&G and generic-drug maker Roxane Laboratories Inc., an Ohio-based subsidiary of Germany's Boehringer Ingelheim. P&G sued Roxane in October 2007 over the P&G drug Asacol, an ulcerative colitis drug. The suit came after Roxane earlier sought approval from the Food and Drug Administration to product a generic version of Asacol. The suit is pending.

P&G was confident in its defense and has won similar cases in the past, including one against Israeli drug maker Teva Pharmaceutical Industries Inc. over Actonel, the osteoporosis treatment for women that is the division's best-selling product.

Nonetheless, Warner Chilcott and Forest wanted the matter settled before inking a deal, said these people, while Cerberus offered a lower price but was willing to take on the potential liability. The status of the matter was unclear Sunday.

A P&G spokesman declined to comment. The company made clear last year it "would look at all options" for the division, said spokesman Tom Millikin.

The deal should boost the profile of Warner Chilcott, which focuses on women's health care and dermatology products. Folding in the division would triple Warner's revenue and give it access to drugs that focus on a range of women's health concerns.

The company recently reported second-quarter profits of $56 million on sales of about $251 million. Its shares trade around 2009 highs of $16.

The P&G unit, which makes roughly $800 million in operating profit, was put on the auction block late last year, in a sales process led by Goldman Sachs Group Inc. It has annual sales of about $2 billion.

P&G has struggled for years to gain a foothold in the pharmaceutical industry, having aborted a 2000 plan to swallow drug makers Warner-Lambert Co. and American Home Products in a three-way deal.

Arbonne names former P&G exec Katherine Napier as CEO 

In July, Ms. Napier was named to the board of directors for Hill-Rom Holdings, replacing Patrick Ryan. She is also a member of Xavier University’s board of trustees, where she earned an MBA. Napier earned a bachelor’s degree in economics from Georgetown University. economics from Georgetown

PepsiCo's Nooyi recognized for supply-chain leadership

Since becoming CEO of the world's second-largest soft-drink maker, Indra Nooyi has reached near-celebrity status in the business world.

Dirk Van de Put appointed CEO Novartis OTC

Dirk was previously Executive Vice President, Fresh Dairy Products, Americas and managed the Water and Beverages in Latin America. Dirk was previously with Coca-Cola and Mars in various General Management roles.

PepsiCo CMO Dave Burwick Resigns

Jill Beraud takes over his duties at struggling beverage giant

PepsiCo Americas Beverages North American CMO Dave Burwick has resigned, the company confirmed today.

Jill Beraud, who is the global CMO for PepsiCo, takes over his duties at the beverage giant. Beraud was also named president, joint ventures.
 
Burwick (pictured), who had spent more than 20 years with the company, returned to the CMO role last August after spending three years as president of PepsiCo's food and beverage businesses in Canada.
 
During his first stint as North American CMO, Burwick helped build the Mountain Dew brand into one of the strongest in the category and brokered one of the first Apple iTunes partnerships. Most recently, he helped relaunch the Pepsi trademark and roll out the "Refresh everything" campaign.
 
The change comes as the company has been struggling. Net revenue declined 7 percent for the second quarter, per the company's earning's call last week. PepsiCo said this was a reflection of challenging category dynamics, "consumer shifts to lower-priced options and an intensely competitive environment, as well as deliberate strategic choices on our part."
 
Beraud joined PepsiCo in December 2008 after spending 13 years at Limited Brands, most recently as chief marketing officer of Victoria's Secret. Prior to that, she worked at Procter & Gamble.

"As much as we will miss Dave, we are delighted to have someone of Jill's marketing and advertising experience, built over more than 20 years at some of America's most highly regarded marketing companies," said PAB CEO Massimo d'Amore in a statement. "Jill has worked on dozens of different brands spanning apparel, food, beverages, publishing, entertainment and more. She is an innovative thinker and an exceptional leader and I am excited to be working with her to grow our total refreshment beverage portfolio."

Beraud will be responsible for the firm's marketing efforts in North and Latin America. She will also oversee PepsiCo's beverage joint ventures in North America, including partnerships with Unilever and Starbucks.

She reports to d'Amore, as will Sarah Robb-O'Hagan, CMO for Gatorade.

Burwick last year replaced Cie Nicholson, who had been with Pepsi since 1997. "Dave built a 20-year legacy of marketing excellence and general management expertise, and we thank him for his considerable contributions to PepsiCo," d'Amore said. "We regret to see him go, but we respect his desire to fulfill his career aspirations in general management elsewhere, and we wish him only the best."

The roster of creative agencies that handles Pepsi beverage brands includes TBWA\Chiat\Day in Playa del Rey, Calif., (Pepsi, Gatorade, Diet Pepsi, Pepsi Edge); BBDO in New York (Mountain Dew, Amp, Aquafina, Starbuck's branded products); and The Arnell Group in New York (SoBe). All three are units of Omnicom Group.

Pepsi spent more than $430 million in major measured media on beverage advertising last year and nearly $210 million in the first five months of 2009, according to Nielsen. Those figures do not include online spending.

Foster's Appoints Chief Marketing Officer

Foster's Wine Estates announces the appointment of Francesca Schuler to the new position of chief marketing officer for North America. In this role, she will be responsible for all consumer and trade marketing activities, including public relations, hospitality, direct to consumer and brand education.

Schuler brings 20 years of sales, marketing and business strategy experience to Foster's. She began her career at Gallo before earning her MBA from the Wharton School of Business. She led Corporate Strategy at Gap Inc., Brand Management for the Gap brand and most recently served as head of marketing for Method Products. While at Method, Schuler helped double the size of the brand with more than 20 product launches in several categories. She also developed an innovative influencer and advocacy marketing program that led to Method being named one of the 50 most innovative companies in 2008 by Fast Company.

Schuler will be based out of Foster's North American headquarters in the Napa Valley.

Robert Gomgort named CEO named for Pinnacle

Pinnacle Foods Group has named Robert Gamgort its new CEO, replacing Jeffrey Ansell, who is leaving. Gamgort, who most recently was North American president for Mars, is starting at Pinnacle immediately.