US food giant Kraft expected to raise bid for Cadbury after below-par offer

KRAFT, the US food giant stalking chocolate maker Cadbury, is thought to be on the verge of launching a sweetened bid for its British target.

The American firm's 10 billion offer is due to expire tomorrow but this will almost certainly be snubbed because it is more than 60p below Cadbury's current share price, which values the confectioner at almost 11bn.

According to weekend press reports, an improved offer is expected to emerge from Kraft in the next two weeks in a final attempt to persuade Cadbury shareholders to succumb to a bid.

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Roger Carr, chairman of the UK maker of Dairy Milk and Wispa chocolate bars, has previously accused Kraft of trying to buy it "on the cheap" and warned shareholders not to let the US suitor "steal your company with its derisory offer".

Kraft, which is behind a string of brands including Oreos cookies, Toblerone bars and Terry's chocolate orange, will have to raise its offer by 19 January unless a rival bidder enters the fray.

Cadbury shares closed at 797.5p on 31 December – the last day of trading before today's New Year opening – 61.5p higher than Kraft's offer.

Fellow US confectioner Hershey and European rivals Ferrero and Nestl are considering their options over Cadbury, although they have yet to make any formal approaches.

Cadbury has outlined its credentials as a stand-alone company by upping long-term performance targets and producing better-than-expected profit margins for the current year. It is expected to publish critical trading information before the 19 January deadline as part of its defence against the Kraft bid.

The Stateside business – which Cadbury has labelled a "low-growth conglomerate" – has meanwhile been warned not to overpay for the company by its own biggest investor, billionaire Warren Buffett. The company declined to comment on the report.

It has told its own investors that it will maintain a disciplined approach to the bid battle and will not sacrifice its investment-grade rating.

Cadbury is seen as favouring a tie-up with Hershey, with which it already has a business relationship as Hershey holds a licence to make Dairy Milk bars and Cadbury Creme Eggs in the US.

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Carr has the backing of shareholders to fight off the current bid. However, if Kraft does raise its offer to more than 800p a share, he would come under pressure to open up the company's books.

Cadbury began life as a grocer's shop in Birmingham's fashionable Bull Street in 1824. Dairy Milk is the UK's top-selling chocolate bar and more than 250 million are sold every year in 33 countries.

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