As John Paulson steadily ups his stake in Kraft-acquisition-target Cadbury (CBY), other hedge funds are following suit and piling in.
This deal is likely to get done folks, given the massive amount of hedge fund and arb trader money in CBY shares who will push for a close. It will just take a small sweetener for Kraft’s offer.
Market Watch: While it’s not clear how much of Cadbury’s stock is in the hands of hedge funds and short-term traders–estimates range from 14% to 40%–Paulson is clearly not alone. Fellow hedge fund Eton Park International lifted its stake to 2.4% Tuesday, buying shares at 757 pence each, while elsewhere on the share register, activist investor Nelson Peltz has a 3.4% stake.
This stake-building comes despite Cadbury rejecting Kraft’s offer of 300 pence in cash and 0.2589 new Kraft shares Monday. The offer valued the company at GBP9.8 billion, or around 717 pence a share.
By buying into Cadbury at 760 pence a share, investors like Paulson are clearly not planning to sell out to Kraft at 717 pence, or even at 761 pence. To make the deal worth while, Paulson will be hoping a final takeout price approaches 800 pence.