9/28/2009 6:59 AM ET Recommended Amazon Reading
(RTTNews) - Kraft Foods Inc. (KFT: News ) is poised to launch a hostile bid for Cadbury Plc (CBY: News ,CBRY.L: News , CDSCF.PK) valuing the UK-based confectioner at around GBP 11 billion, as the U.K. takeover panel is preparing to set a deadline this week, by which time Kraft Foods must put a firm offer on the table, or walk away for at least six months, media reported Sunday.
According to the reports, the US-based food giant could bid 800 pence a share, which could rise to 850 pence as the bid battle reaches its climax over the 60-day limit set by the panel for takeovers.
Kraft Foods is reportedly putting the final touches on the financing package, with which, it would be able to offer about half the consideration in cash, while the remainder is expected to be met by issuing new Kraft shares for Cadbury shareholders. Previous reports had noted that Kraft's advisers Citigroup Inc. and Deutsche Bank AG are working on setting up debt financing, which would consist of a bridge loan to be repaid with the proceeds of an investment-grade bond offering, to cover about half of the bid price. There were also reports that Kraft might seek funds from Warren Buffett, its largest investor, to finance a higher offer.
It was on September 7 that Kraft Foods announced its proposal to acquire Cadbury for 745 pence a share, totaling about GBP 10.2 billion, but Cadbury's Board rejected the offer immediately, stating that the proposal fundamentally undervalued the company and its prospects. However, Kraft Foods had said that it is "committed to working toward a recommended transaction and to maintaining a constructive dialogue and is announcing the proposal as a means to encourage and further that process."
But, Wall Street Journal reported last week, citing an interview with Cadbury Chief Executive Officer Todd Stitzer, that Cadbury acknowledged that the proposed combination would make 'some strategic sense'. Stitzer then had also said that the company was confident about growth prospects beyond the end of the restructuring plan in 2011, in the face of the unsolicited bid. "Looking beyond 2011, we will be well positioned to capitalized on new revenue growth opportunities, sustain best in class margins, while reinvesting in further efficiency initiatives," he added.
Meanwhile, speculation is high that after Kraft tables a bid, Hershey Co. (HSY: News ), a US-based confectioner, might come out with Swiss food giant Nestlé (NSRGY.PK: News ) in a joint counter offer for Cadbury, resulting in a takeover battle. Hershey and Cadbury executives discussed a merger in 2007, but the conversations never led to a deal.
KFT closed Friday's regular trading session at $26.53, down $0.15, on a volume of 11.7 million shares.
CBY settled at $51.10, down $0.17, on a 1.15 million share volume. On the London Stock Exchange, CBRY.L is currently at 803.50 pence, up 3.00 pence or 0.37%, on a volume of 712 thousand shares.
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