Kraft, the American food company, is poised to initiate a hostile takeover bid for Cadbury today at or slightly above the offer it made in September, which valued the British confectioner at £10.2 billion, according to a person familiar with the deal.
Last night Kraft was finalising plans to go directly to shareholders of Cadbury before the UK Takeover Panel’s “put up or shut up” deadline expires at 5pm. The Cadbury board will meet today to discuss its response to Kraft’s offer. The chocolate maker is expected to rebuff any low-ball offer immediately. It has the support of some key shareholders, who do not want it to engage with Kraft without an offer of 850p a share or more.
Roger Carr, Cadbury’s chairman, is expected to say that Kraft’s poor third-quarter results, reported last week, indicate that the American company has become a “no-growth conglomerate” and that there would be no value in joining forces with it. He is likely to note that Kraft has failed to meet analysts’ projections in four of the past five quarters.
The American foodmaker, which makes Oreo cookies and owns several British brands, including Terry’s Chocolate Orange, originally offered a cash-and-shares deal that valued Cadbury at 745p a share. Cadbury rebuffed the offer, characterising it as “unappealing”. A fall in Kraft’s share price since then has seen the value of that offer fall back to about 720p, as counter-bidders have failed to emerge. Cadbury shares closed at 758p on Friday.
For its new offer, Kraft is expected to “stay where it is” or to “slightly increase” its offer, a person with knowledge of the deal said. Kraft and Cadbury have been locked in talks with the British company’s shareholders over the past few weeks to establish their views on a deal.
Advertisement
Although some have suggested that a bid of as much as 850p might be necessary to motivate the Cadbury board, a bid that high seemed unlikely, the person said, particularly because an expected bidding war had failed to materialise. “Why bid against yourself?” he said.
Anne Gudefin, a fund manager with Franklin Resources, whose Mutual Global Discovery Fund is one of Cadbury’s biggest investors, said that she “had an idea” of a bid price for Cadbury that would be acceptable.
“We’ll just wait until we have something on the table. If it comes and if we feel that it’s going to be appropriate, we will comment on it,” she said.
Irene Rosenfeld, the chief executive of Kraft, is said to be determined to acquire Cadbury, but not at any price. Last week she said that she would stay “disciplined” on Cadbury and not risk her company’s dividend. She said: “With or without Cadbury, Kraft Foods is well-positioned.”
If the companies combine, it would create an enterprise that generated at least $50 billion (£30 billion) in revenue. Kraft, the sector leader in the United States, is second worldwide to Nestl? and has a strong presence in Europe, with brands such as Milka and Toblerone. Cadbury dominates Britain and Australia with brands such as Crunchie and Flake.
Advertisement
Kraft claims to have identified about $625 million of cost savings if its bid succeeds. Bankers say that it plans to borrow about $9 billion from nine lenders, led by Citigroup and Deutsche Bank, to finance a bid.