Cadbury waits for US food giant Kraft to make a sweeter offer

Published on Sunday 8 November 2009 19:03

US FOOD giant Kraft is expected go hostile with a near £10 billion bid for British confectionery group Cadbury today but the renewed approach is expected to fall well short of shareholders' expectations.

One institutional shareholder in Cadbury, which rejected Kraft's initial offer of 745p in cash and shares, said last night that it was very likely the suitor will tweak its offer upwards before the City Takeover Panel's deadline of 5pm today.

But the investor said: "I think Kraft will go hostile at a very small premium to the original offer." Movements in the two companies' share prices now value the original approach at 720p a share, or 9.8bn.

The shareholder added: "There is no point coming back with exactly the same offer as that has already been dismissed by the institutions. I think Kraft will just want to get the ball rolling, and then maybe lift the offer farther down the line after talking with shareholders."

Another shareholder said Cadbury was likely to firmly rebuff for a second time what it calls the unwanted attentions of an under-performing company.

But he added: "Monday won't decide anything really because the increase in what is probably going to be offered at this time is very unlikely to be meaningful."

However, he said the battle remained finely-poised as Kraft seemed determined on a deal. "It is trite to say, but the outcome really will depend on price," the institutional investor added.

It is understood that Roger Carr, Cadbury's chairman, has now met nearly all of the company's top 50 shareholders in London and New York.

Sources close to Cadbury, maker of Dairy Milk chocolate, believe that it is winning the argument after weak third-quarter results from Kraft this week.

Analysts believe Carr will continue to stress after tomorrow's expected move that the aggressor is a "low growth or no growth" conglomerate.

He is expected to point out that Kraft has missed market expectations with four of its past five quarterly figures.

But one source close to the situation said: "It does seem this could still go either way. Kraft is not actually operating from a position of trading strength, but there looks no alternative bidder for Cadbury out there and so its share price could plummet if the Americans walk."

Analysts have suggested that the two-month tussle between Cadbury and Kraft has also placed the credibility of Kraft chief executive officer Irene Rosenfeld on the line, given that it has been so public.

Rosenfeld is ranked as the second most powerful American businesswoman by Fortune magazine, but Cadbury would be easily the biggest deal during her three years at the helm.