Kraft starts Cadbury countdown

Published on Friday 4 December 2009 21:28

KRAFT posted its hostile offer for Cadbury to the UK company's shareholders yesterday, triggering a two-month deadline to complete the deal.

The maker of Toblerone is offering about 9.8 billion to buy the Bournville-based chocolate maker, despite Cadbury's board immediately rejecting it.

A merger would create the world's largest confectionery group, with revenue of more than $50bn a year (30.3bn).

Shares in Cadbury have consistently traded at around 800p, well above the 713p value implied by Kraft's offer, as the market hopes a rival will emerge to kick off a bidding war.

Italy's Ferrero and the US group Hershey have both said they are considering making a bid for Cadbury, while the Swiss group Nestl is seen as a possible partner to a rival bidder.

Kraft has 60 days from posting the offer document to shareholders to complete the deal. However, if a rival bid emerges the deadline is reset.

Analysts have said that Kraft could ward off rivals by tabling a higher bid. However, the US company's board has insisted it will maintain discipline. Irene Rosenfeld, Kraft's chairman and chief executive, said: "We remain confident that the unique combination of Kraft Foods and Cadbury would create a significant growth opportunity for both businesses.

"Our offer is fully financed, represents a substantial premium to Cadbury's unaffected share price and provides both immediate value certainty and meaningful longer-term upside potential."

The terms of the offer are the same as Kraft laid out a month ago, when it confirmed it would make a formal offer. Kraft is offering 300p cash plus 0.2589 new Kraft shares for each Cadbury share.

Worth around 735p a share when Kraft originally said it was considering a bid, a weaker US dollar has reduced its value to around 713p. The structure of Kraft's allows it to up its bid or increase the cash component until day 46 of the offer.

Cadbury declined to comment on the offer yesterday due to US takeover rules. It now has 14 days to publish a defence document. Its shares dropped 5p to 795p.