British candy company Cadbury agreed to a fattened US$19.5 billion takeover offer from US food group Kraft in a deal that would create the world’s biggest chocolate maker.
The board of Cadbury PLC, maker of Creme Eggs and Dentyne gum, gave up a four-month fight to remain independent and yesterday recommended shareholders take Kraft’s offer of £8.40 (US$13.78) per share, amounting to £11.9 billion.
Cadbury shareholders would also get a £0.10 dividend previously promised by Cadbury.
PHOTO: AFP
The revised bid is for £5.00 cash and 0.1874 new Kraft shares for each Cadbury share, still somewhat less than some analysts believed the company is worth, but 50 percent higher than Cadbury’s market value before Kraft went public with its approach in September.
A previous offer of £10.5 billion valued Cadbury at about £7.70, but was dismissed by Cadbury as “derisory.”
Kraft Foods Inc, maker of Toblerone chocoloate, Velveeta processed cheese and Oreo cookies, still has to persuade a majority of Cadbury shareholders to accept the deal, and the door remains open until 7am on Monday for The Hershey Co to jump in with a rival bid.
The combined companies would be the world leader in chocolate and sweets, Kraft said, and No. 2 globally in the high-growth gum market. But some in the UK are disgruntled at the prospect of a historic brand losing its independence.
Cadbury’s roots go back to the grocery store opened in 1824 by John Cadbury in Birmingham. A Quaker, Cadbury believed cocoa and drinking chocolate were healthy alternatives to alcohol, considered to add to the miseries of the working class.
Its Dairy Milk chocolate brand was launched in 1905 as a challenge to dominant Swiss chocolate makers.
“We have great respect for Cadbury’s brands, heritage and people. We believe they will thrive as part of Kraft Foods,” Kraft chief ececutive officer Irene Rosenfield said. “This recommended offer represents a compelling opportunity for Cadbury shareholders, providing both immediate value certainty and upside potential in the combined company.”
Cadbury chairman Roger Carr, who had led a spirited defense against Kraft’s previous offer, said he believed the deal “represents good value for Cadbury shareholders.”
Cadbury shares were up 3.3 percent at £8.34 following the announcement.
“Although we always considered that 850 pence could be enough to win shareholder support we have to admit surprise at how meekly Cadbury has apparently acquiesced,” said Jeremy Batstone-Carr, analyst at Charles Stanley & Co.
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