Javier Espinoza, 09.17.09, 05:45 AM EDT
Shares of Cadbury rise despite Warren Buffett's warning that Kraft shouldn't overpay for the British chocolate maker.
LONDON -- Cadbury shareholders shrugged at billionaire Warren Buffett's warnings to Kraft not to overpay for the British chocolate and gum maker following the launch of a $16.7 billion bid by the U.S. food giant.
“Any time you’re in a takeover, the animal spirits run high," said Buffett in an interview, adding that Kraft is already offering the "full price" for Cadbury. Buffett is Kraft's biggest shareholder with a 10% stake in the firm.
However, this warning from the world's second richest man doesn't appear to have thwarted hopes that Kraft will have to raise its offer. Cadbury ( CBY - news - people ) shares rose 0.2%, to 788 pence ($13.03) in early trading.
Earlier this month, Kraft announced its hostile takeover bid for Cadbury, which the British company "unequivocally" rejected, as it believes the offer undervalues the business. On Sept. 7 Kraft was offering 745 pence ($12.32) a share for Cadbury, valuing the company at 10.2 billion pounds ($16.7 billion). However, Kraft's share price has slid since then, decreasing the value of its cash and shares offer. But Kraft ( KFT - news - people ) is expected to come back to Cadbury with a better offer. (See "Kraft Courts Cadbury.")
Analysts at Cazenove have valued Cadbury assets at 800 pence ($13.19) per share, and that a takeover by Kraft could result in $650 million of cost synergies, or 4% of combined confectionery sales.
On Wednesday, the British company's Chief Executive Todd Stitzer told investors why he thinks the company should remain independent, but he failed to quell appetite for a takeover. (See "Cadbury's Bitter Fight.")
A takeover of Cadbury, which was founded by Quaker John Cadbury in 1824, would be the biggest in the U.K. confectionary industry since Nestle bought Rowntree in 1988
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