The board of Cadbury is preparing for a fight to the death with Kraft as the American food group puts its finishing touches to an improved takeover bid.
Insiders said that Kraft was still debating late into last night whether to launch its new offer today or tomorrow and what the final price should be.
Kraft is expected to raise its shares-and-cash hostile bid from 771p per Cadbury share to between 820p and 830p, valuing the chocolate company at between £11.3 billion and £11.4 billion, up from an existing offer of £10.5 billion.
Cadbury declined to comment, but The Times understands that, at this level, Roger Carr, Cadbury’s chairman, would not recommend Kraft’s bid even if he feared there was a risk that 50 per cent of shareholders might accept it. Under takeover rules, Kraft has until tomorrow to raise its offer and then until February 2 to persuade Cadbury’s shareholders to accept it.
Some of Cadbury’s biggest investors have told Mr Carr that they will back his decision not to open the books unless Kraft raises its bid to at least 850p a share. Mr Carr and Todd Stitzer, Cadbury’s chief executive, have said repeatedly that Kraft’s present offer is derisory.
Advertisement
As revealed by The Times, the Illinois-based Kraft has also been working on a plan to increase the cash component of its offer to sway hedge funds and British institutional investors that do not want Kraft shares. It is understood that when the American company launches its improved bid, it will include about 60p more in cash.
City sources speculate that Kraft may also put a “collar” on its share price as part of its bid. This would set a floor, beneath which Kraft’s share price cannot fall for the purposes of the ratio of the number of Kraft shares that it will swap for Cadbury ones. Such a step would address concern among its own shareholders, including Warren Buffett, that Kraft shares are undervalued.
It is understood that Hershey, Kraft’s American rival, is working desperately to assemble a “white knight” bid for Cadbury. Such an offer would involve the American chocolate company bidding alone for its British peer and almost certainly would be recommended by Mr Carr if the price were high enough.
However, Hershey, a Pennsylvania company that is half the size of Cadbury and is severely restricted by its controlling trust, faces considerable obstacles to get financing for such a deal and is racing against time to compete with Kraft’s bid.