Cadbury was on the verge last night of accepting an improved offer from Kraft thought to value the company at up to 850p a share, or £11.7 billion.
It is believed that Kraft and its advisers approached Cadbury yesterday to propose a consensual deal at a significantly higher level than the £10.5 billion it had previously indicated that it was prepared to pay to the UK company’s board.
Discussions between the two sides were continuing late last night but it is believed Kraft has told Cadbury’s board that it will pay between 840p and 850p a share and that the chocolate maker may be on the verge of caving in, ending its 186 years as an independent company.
An announcement is expected first thing this morning if bankers can tie the deal up overnight. Kraft must launch its best and final offer for Cadbury by midnight tonight.
It remains a possibility that Hershey, Kraft’s American rival, will launch its own bid. The Takeover Panel is understood to be close to deciding whether Hershey should be given an extra weekend to make a counter-offer. JP Morgan Cazenove, Hershey’s adviser, is working against the clock to put together a bid.
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Kraft, which is advised by Lazard, Deutsche Bank and Citigroup, declined to comment, as did Cadbury, advised by Morgan Stanley, UBS and Goldman Sachs, and Hershey.
Shares in Cadbury closed up 14p, or 1.8 per cent, at 807½p yesterday.
If a deal is agreed, it would bring to an end the intense hostility between the companies that has been on show since Kraft announced its wish to own Cadbury last autumn.
The animosity has escalated since the start of the year. Roger Carr, the chairman of Cadbury, has been urging shareholders not to let Kraft “steal” the British confectionery group.
In Cadbury’s second defence document against Kraft last week, Mr Carr had begged investors: “Don’t let Kraft steal your company with its derisory offer.”
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Todd Stitzer, Cadbury’s chief executive, accused Irene Rosenfeld, his counterpart at Kraft, and her management team of having a history of overpromising and underdelivering.
Kraft dismissed Cadbury’s defence as “underwhelming”.
Unite, the union representing Cadbury workers, has warned that a takeover by Kraft could trigger “massive” job losses among the 6,000-strong UK and Ireland workforce.
Kraft has stated that it will keep the Somerdale plant in Keynsham open, which Cadbury’s management have earmarked for closure early next year.
But Unite said the US group was not promising to save any existing jobs at the West Country site.
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Kraft had faced pressure from Warren Buffett, the billionaire and the group’s largest shareholder, not to overpay for Cadbury. At the beginning of the month, Mr Buffett said that he was opposed to Kraft paying much more in shares for Cadbury, stating that issuing new stock to finance a deal represented a “blank cheque”.
However, two weeks ago, Kraft raised $3.7 billion (£2.3 billion) by selling its pizza business.