Tuesday, 8 September 2009

A soap opera begins

On 17th October 1988, late in the day, Monday, Philip Morris announced an unsolicited bid to acquire Kraft. It set off a soap opera , the likes of which have not been seen since.

October 1988 was an unbelievable month in business history. Two weeks earlier, on October 3, Grand Metropolitan (now Diageo) launched a hostile bid for Pillsbury. But then on October 20th, the atom bomb fell. The management of RJR Nabisco announced a bid to take the company private. That set off a bidding war with KKR, a private equity firm, who ultimately acquired RJR Nabisco for a staggering $25 bn. For 10 years that was the largest acquisition in the world by far.

Between October and December of 2008, for the first time, the front pages in newspapers around the world were filled with business news. With three large hostile bids going on simultaneously, daily gossip, who did what, who was seen with who, became staple news. News helicopters hovered above company headquarters taking pictures. The soap opera was in full swing. The food industry was dominating news – all three companies in play were either food companies or had substantial food businesses.

I was reminded of this when I read yesterday of Kraft’s unsolicited bid for Cadbury. Sense of déjà vu. The brash corporate raider from Chicago against a good British company ( pip pip, toodleoo, Right Ho !). It will be another soap opera. Won’t be like October 1988, but nonetheless will be a riveting story to follow.

But back to October 1988. The battle for RJR Nabsico was immortalised in a book – Barbarians at the Gate. It’s a fascinating read – strongly recommend to anybody who has an interest in business. Its written like a thriller, and all of it is true. You can buy it in the US here and in India here. It was even made into a movie.

Fast forward to the present day. The Kraft Cadbury dogfight will be great to watch. For my long time colleagues, this will be particularly interesting, for one of the characters involved is somebody whom we know well ….

8 comments:

  1. You are right, it will be Soap Opera which will keep many of glued to corporate news and papers for some time to come.
    Will definitely check Barbarians at the Gate

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  2. Dude u write so dammn well all the business information which I have no idea, ur posts are enlightning about business stuff to me. Keep writing and please find community with business audiance and join ur posts there, it would be mutually beneficial :P

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  3. Thank you for sharing:) I learnt something new today:)

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  4. Very informative post.Thanks for this.
    When I was reading through the post, I remembered the "Cold Steel" book written by Tim Bouquet and Byron Ousey about the bitter battle between two largest steel producers Mittal and Arcelor. The book is no less, when compared to fiction thriller. I enjoyed the book. Pls, read, if you get a chance.

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  5. @ Adesh - Yes there will be many a twist and tuen, but I think at the end Kraft will win.

    @Srivats - I am flattered, honoured, touched. Thanks for such kind words

    @Savitha - Thanks for coming here and commenting regularly. I am much obliged.

    @Kotla - Thanks for the book tip. Hadn't read this one - will do so now.

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  6. kiwibloke8/9/09

    Nice - another naturalized kiwi into the bid war!
    way to go!

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  7. Ramesh, I find it puzzling why companies doing well can still find themselves in a hostile bid. Is hostile bids a kind of business strategy? I would have expected the companies will get asked nicely if they are for sale and their wishes will be respected.

    The Kraft, Nabisco drama was awesome. I have been looking out for something different as far as books go by - so your recco is on my list as well as Cold Steel recco'ed by Kotla.

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  8. @kiwi - I doubt if even an ounce of 'kiwiness" is there in him !

    @thoughtful train - Hostile bids are fairly common especially amiongst publicly listed companies. In listed companies, managements usually want to remain independent and not get taken over. So a friendly deal is actually rare - more common is the sort of thing that is happening between Kraft and Cadbury.

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