Cadbury's last stand

Cadbury's last stand against Kraft's £10.4billion ($16.8 billion) hostile bid has thrown the onus on the U.S. food group to come up with more cash and make a better offer if it is to succeed in its proposed takeover, reports the Financial Times.


Issuing healthy 2009 financial figures, including underlying sales growth of 5 percent, and stressing that Kraft's offer which values Cadbury at about 764p, should be rejected Cadbury pointed out that its standalone value increased in recent months because of strong trading in 2009; and that share prices of Cadbury's peers in the food industry had risen by some 12 per cent since Kraft's initial approach in late August. Roger Carr, Cadbury's chairman, said: "This company is in very good health.There is no reason to be owned by anyone else at all, unless they pay a very large premium." Meanwhile, Todd Stitzer, Cadbury's chief executive, said investors were better off owning shares in a focused, pure-play confectionery company than a food conglomerate operating in "low-growth, low-margin, private-label categories." 

According to Andrew Wood, analyst at Bernstein Research, "Should Kraft not significantly raise its bid, we would expect that Cadbury shareholders would not accept the offer."  

Kraft said it will amend its offer on or before Jan. 19. It could raise its bid to 840p or 850p, uping the amount of cash in its cash-and-stock offer to 420 from 360p using cash from its recent U.S. pizza sale to Nestle, allowing it to offer more cash and issue 323 million shares instead of the 370 million shares initially proposed, potentially satisfying Kraft's biggest investor, Warren Buffett, who warned the U.S. company against using too much stock to fund an acquisition.