The_Pumpkin_King
19-01-2010, 10:05 AM
FT) -- Cadbury and Kraft have begun negotiations that could lead to an agreed deal of up to £11.7bn ($19bn) for the UK group.
The move, after months of acrimony following the US food group's hostile takeover bid, could be announced as early as Tuesday morning and values Cadbury at 850p per share.
An agreed cash-and-stock offer, which would carry the recommendation of Cadbury's board, would bring to an end five months of hostile relations after Kraft made an unsolicited bid for the maker of Flake chocolate bars and Trident chewing gum in late August.
Kraft's chief executive, Irene Rosenfeld, flew in from the US over the weekend for the negotiations. She approached Cadbury on Monday with the higher offer. Kraft is expected to fund the additional increase in its bid, which valued Cadbury at 771p last week, with cash.
Of the total offer, 500p is expected to be in cash and the remainder in stock. Kraft initially offered 300p in cash, and this month sweetened it to 360p. The value of the increased offer is 840p, plus a 10p dividend.
The additional cash represents a 90 per cent premium to the Cadbury share price before the deal was announced and a 50 per cent premium to Cadbury's undisturbed share price of 568p before Kraft approached Cadbury in late August.
While a price of 850p is likely to win the support of investors, who have backed the board's decision to reject Kraft's bid, the sale of one of the UK's most iconic brands to an American company will be considered a deep loss in Britain.
In recent weeks. business secretary Lord Mandelson has commented in general terms about the importance of shareholders taking a long-term view of their stakes in major companies -- which has been interpreted as hostility to the bid for Cadbury. But a spokesman for the minister said on Monday night that any offer was a matter for shareholders and the company.
Cadbury's board publicly rejected an initial offer from Ms Rosenfeld of 745p per share in early September and launched a staunch defence campaign that saw Roger Carr, chief executive, warn investors not to let the US food group "steal" Cadbury.
However, Mr Carr has consistently maintained he would be prepared to recommend an offer if it was high enough, and has stressed that he would not wage an independence campaign for Cadbury.
Cadbury last week made a strong final case for rejecting Kraft's bid at previous levels by stressing its progress on meeting stringent profit margin targets and its exposure to emerging markets.
An agreed deal would block US confectioner Hershey, which has been considering a counter-offer for Cadbury to prevent being left behind as the global confectionery industry consolidates, from making a bid.
A combined Kraft/Cadbury would rank alongside Mars, which last year acquired Wrigley, as one of the world's biggest confectionery companies. Kraft decided to bid for Cadbury after the UK company in 2008 spun off its US soft drinks business, making it a standalone confectionery company.
Kraft, which has been derided by Cadbury as a "low-growth conglomerate" during the takeover battle, has argued that acquiring the UK company will help transform it into a faster-growing Cadbury as well as extend its reach into lucrative emerging markets like India and Mexico.
If Cadbury's board does not recommend Kraft's offer, the door is still open until Friday for a counter-bid by Hershey .
However, analysts believe that the US confectionery group would be unable to match an offer close to 850p from Kraft due to financing constraints after potential partners in a counter-offer, Nestlé and Ferrero, pulled out of the bidding process.
Cadbury's share price closed on Monday at 807.5p. The negotiations between Cadbury and Kraft come ahead of a Takeover Panel deadline on Tuesday midnight for Kraft to amend its offer. Cadbury shareholders have until February 2 to vote on Kraft's offer.
Cadbury and Kraft declined to comment.
http://edition.cnn.com/2010/BUSINESS/01/18/kraft.cadbury.sweet.ft/index.html
The move, after months of acrimony following the US food group's hostile takeover bid, could be announced as early as Tuesday morning and values Cadbury at 850p per share.
An agreed cash-and-stock offer, which would carry the recommendation of Cadbury's board, would bring to an end five months of hostile relations after Kraft made an unsolicited bid for the maker of Flake chocolate bars and Trident chewing gum in late August.
Kraft's chief executive, Irene Rosenfeld, flew in from the US over the weekend for the negotiations. She approached Cadbury on Monday with the higher offer. Kraft is expected to fund the additional increase in its bid, which valued Cadbury at 771p last week, with cash.
Of the total offer, 500p is expected to be in cash and the remainder in stock. Kraft initially offered 300p in cash, and this month sweetened it to 360p. The value of the increased offer is 840p, plus a 10p dividend.
The additional cash represents a 90 per cent premium to the Cadbury share price before the deal was announced and a 50 per cent premium to Cadbury's undisturbed share price of 568p before Kraft approached Cadbury in late August.
While a price of 850p is likely to win the support of investors, who have backed the board's decision to reject Kraft's bid, the sale of one of the UK's most iconic brands to an American company will be considered a deep loss in Britain.
In recent weeks. business secretary Lord Mandelson has commented in general terms about the importance of shareholders taking a long-term view of their stakes in major companies -- which has been interpreted as hostility to the bid for Cadbury. But a spokesman for the minister said on Monday night that any offer was a matter for shareholders and the company.
Cadbury's board publicly rejected an initial offer from Ms Rosenfeld of 745p per share in early September and launched a staunch defence campaign that saw Roger Carr, chief executive, warn investors not to let the US food group "steal" Cadbury.
However, Mr Carr has consistently maintained he would be prepared to recommend an offer if it was high enough, and has stressed that he would not wage an independence campaign for Cadbury.
Cadbury last week made a strong final case for rejecting Kraft's bid at previous levels by stressing its progress on meeting stringent profit margin targets and its exposure to emerging markets.
An agreed deal would block US confectioner Hershey, which has been considering a counter-offer for Cadbury to prevent being left behind as the global confectionery industry consolidates, from making a bid.
A combined Kraft/Cadbury would rank alongside Mars, which last year acquired Wrigley, as one of the world's biggest confectionery companies. Kraft decided to bid for Cadbury after the UK company in 2008 spun off its US soft drinks business, making it a standalone confectionery company.
Kraft, which has been derided by Cadbury as a "low-growth conglomerate" during the takeover battle, has argued that acquiring the UK company will help transform it into a faster-growing Cadbury as well as extend its reach into lucrative emerging markets like India and Mexico.
If Cadbury's board does not recommend Kraft's offer, the door is still open until Friday for a counter-bid by Hershey .
However, analysts believe that the US confectionery group would be unable to match an offer close to 850p from Kraft due to financing constraints after potential partners in a counter-offer, Nestlé and Ferrero, pulled out of the bidding process.
Cadbury's share price closed on Monday at 807.5p. The negotiations between Cadbury and Kraft come ahead of a Takeover Panel deadline on Tuesday midnight for Kraft to amend its offer. Cadbury shareholders have until February 2 to vote on Kraft's offer.
Cadbury and Kraft declined to comment.
http://edition.cnn.com/2010/BUSINESS/01/18/kraft.cadbury.sweet.ft/index.html