Cadbury accepts Kraft's £11.9bn bid

BRITISH confectionery icon Cadbury yesterday agreed an increased £11.9 billion takeover bid from Kraft Food of the United States, as speculation turned to whether US rival Hershey might now trump it with a higher offer.

• Despite the Cadbury board's acceptance of Kraft's offer, there is still much opposition to the deal. Picture: Getty Images

Confirmation of the bumper takeover also sparked fears of significant job losses at Cadbury, although Kraft – branded "a plastic cheese company" by one critic of the proposed marriage – would not be drawn on the subject.

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The City Takeover Panel said yesterday that Hershey and Italian group Ferrero, who have both previously expressed their interest in Cadbury, have until Monday to clarify their intentions.

But Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: "This long battle looks to be finally drawing to a close, with price proving the determining factor. The likelihood of Hershey throwing its hat into the ring looks remote, given the required level of debt which it would have to support."

Kraft chief executive Irene Rosenfeld broke the deadlock with Cadbury's board by injecting more cash into the cash-and-shares offer, increasing the value to 840p a Cadbury share. In addition, Cadbury shareholders will get a special 10p dividend, bringing the total value of the new offer to 850p.

That compared with a previous rejected offer of 769p. Cadbury's shares closed up 29p at 836.5p yesterday.

The deal would create the world's biggest confectionery group by ending the 186-year-old independence of the British icon.

The enlarged group brings Cadbury's Dairy Milk chocolate and Trident gum, and Kraft's Milka, Toblerone and Terry's chocolate brands under one roof.

Warren Buffett, the US investment guru who owns 9.4 per cent of Kraft, had warned Rosenfeld not to overpay and issue too many new Kraft shares.

Kraft responded by saying it was issuing 265 million new shares compared with its original plan to issue 370 million.

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Rosenfeld said: "We have great respect for Cadbury's brands, heritage and people. We believe they will thrive as part of Kraft Foods."

She increased Kraft's annual cost savings target to at least $675 million (412m) by year three, up from $625m, but made no mention of possible job losses at Cadbury 46,000 global workforce.

Cadbury called Kraft's previous offer "derisory", and claimed the US giant was a low profit-margin conglomerate trying to acquire the British group "on the cheap".

Yesterday's deal had its critics. Felicity Loudon, a fourth generation member of Cadbury's founding family, said: "I'm horrified. We shouldn't give up. I think there's a cultural imbalance. For a quintessentially, philanthropic iconic brand to sell out to a plastic cheese company – there's no mix there."

Stephen Boyd, assistant secretary of the Scottish TUC, said: "Observers are united in the belief that there is little industrial logic behind the bid."

Some confusion surrounded the position of one leading British shareholder in Cadbury, Edinburgh-based Standard Life Investments, which holds under 1 per cent of the shares.

David Cumming, head of UK equities at SLI, said: "We are supportive of the management's decision although the achieved price is slightly light of our stated target." Cumming had suggested on Monday that a price of above 9 a share would be necessary to secure SLI's support.


• The world's second-largest confectionery company after Mars-Wrigley, with brands such as Dairy Milk chocolate, Trident gum and Halls cough drops.

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• Started life in 1824 with John Cadbury's shop in Birmingham selling tea and cocoa.

• Merged with Schweppes in 1969 as Cadbury Schweppes.

• Demerged Cadbury Schweppes in 2008 following shareholder pressure, creating the London-listed Cadbury and US soft drinks group Dr Pepper Snapple.

• Cadbury operates in more than 60 countries and employs 46,000. Full-year revenue in 2008 came to 5.4 billion.

• The company's unaudited figures showed 2009 revenue rose 11 per cent, helped by currency movements.


• World's second-largest food group, after Nestl. Brands include Maxwell House coffee, Philadelphia cream cheese and Toblerone.

• The company's origins date to 1903, when James L Kraft began a business selling cheese from the back of a wagon in Chicago.

• Kraft was acquired by tobacco corporation Philip Morris in 1988 for $12.9bn.

• In 2000, Philip Morris bought Nabisco, the maker of Oreo cookies, for $19.2bn, and merged it with Kraft.

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• Kraft Foods was listed on the New York Stock Exchange in 2001, with the spin-off completed in 2007.

• The company has 98,000 employees and 168 plants. Revenues hit $42bn in 2008.