Kraft Foods Inc, the world’s second-largest food maker, said Cadbury Plc rejected a proposed £10.2 billion (US$16.7 billion) offer that would create “a global powerhouse in snacks, confectionery and quick meals.”
The offer of £3 in cash and 0.2589 new Kraft Foods shares per Cadbury share values the UK candy maker at £7.45 a share, 31 percent more than the Sept. 4 closing price, Northfield, Illinois-based Kraft said yesterday.
Kraft said it is “committed” to its plan “and to maintaining a constructive dialogue and is announcing this proposal as a means to encourage and further that process.”
“It’s competitively priced, but I think they will have to go higher,” Martin Deboo, an analyst at Investec Securities, said by phone.
Deboo has a “hold” recommendation on Cadbury.
Analysts said last year that Cadbury may be a target for Kraft, which in 2007 bought Groupe Danone SA’s biscuit unit for US$7.8 billion to become Europe’s biggest cookie maker. Cadbury spun off its Dr Pepper beverages unit in May last year to focus on confectionery brands like Dairy Milk chocolate and Wispa bars.
Kraft said a combined company would have revenue of about US$50 billion and have potential to realize annual pretax savings of US$625 million at a cost of US$1.2 billion over three years.
A deal would be “accretive” to earnings in the second year after completion, the US company also said. Kraft would expect to raise its long-term revenue growth target to more than 5 percent from more than 4 percent should the transaction happen. Its goal for per-share earnings growth would increase to between 9 percent and 11 percent from 7 percent to 9 percent.
“We hope to engage with the board of Cadbury on a constructive basis with the goal of consummating a recommended transaction,” Kraft chairwoman and chief executive officer Irene Rosenfeld said in the statement. “Cadbury’s brands, which are highly complementary to our portfolio, would benefit from Kraft Foods’ global scope and scale and array of proprietary technologies and processes.”
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