• Kraft must make formal bid or walk away for six months under UK takeover rules
• Cadbury chairman Roger Carr holding out for 850p-per-share offer
- guardian.co.uk, Sunday 8 November 2009 19.31 GMT
Kraft has until 5pm tomorrow to launch a formal offer or walk away for six months under UK takeover rules. It swooped on the British confectionery maker in early September with an informal proposal worth £10.2bn, or 745p a share.
Cadbury, the company behind Dairy Milk, Jelly Babies and Bassett's Allsorts, has firmly rejected Kraft's overtures, describing the initial cash-and-shares offer as "unappealing".
Undaunted, Kraft has lined up a $9bn (£5.4bn) bridge loan to fund the Cadbury acquisition from a group of nine banks, including Citigroup and Deutsche Bank. Its lead adviser on the deal is Lazard.
Roger Carr, the Cadbury chairman, this weekend described Kraft as having turned from a "low-growth conglomerate" into a "no-growth conglomerate". The American company released worse-than-expected third-quarter results last week and cut its sales forecast for the year.
Carr is expected to reiterate tomorrow that while Kraft may need Cadbury, Cadbury does not need Kraft. He is understood to be holding out for an offer approaching 850p a share before he will begin discussions with Kraft, whose brands range from Philadelphia and Dairylea cheese to Kenco coffee, Toblerone and Terry's Chocolate Orange.
Kraft is unlikely to raise its offer price significantly, though it may improve its terms to stay in the game and win over Cadbury shareholders. Its weak results last week have eroded the value of the stock component of the offer and analysts said it may have to increase the amount of cash it is offering.
Kraft is hoping that shareholders, who have so far held firm, will back its proposal if a bidding war fails to materialise. Its initial approach two months ago immediately sparked talk of such a battle, but interest from rivals such as the US group Hershey has yet to emerge and the consumer goods group Unilever publicly ruled itself out of the running last week.
Martin Deboo, an analyst at Investec Securities, said last week that Kraft would not pay more than 800p a share. He previously thought it would go up to 875p but changed his mind after Kraft's chief executive, Irene Rosenfeld, stressed last Tuesday that she would be prudent in her pursuit of Cadbury. Kraft's largest shareholder, the billionaire investor Warren Buffett, has warned the company against overpaying for Cadbury.
Kraft has sought to defuse union opposition in Britain by including in its initial approach a pledge to keep open Cadbury's Somerdale chocolate factory in Keynsham, near Bristol, which has been earmarked for closure. This would save 500 jobs, but the Unite union is sceptical, saying that two meetings with Kraft have failed to produce any concrete details.
While the Cadbury family are no longer major shareholders, Felicity Loudon, whose grandfather, Egbert Cadbury, was managing director of Cadbury Brothers, has expressed her dismay at the business – which dates back to 1824 – disappearing into a "plastic cheese company".
Shares in Cadbury have fallen back to their lowest level since Kraft made its surprise approach on 7 September, closing at 758p last Friday. Before Kraft made its interest public, the stock traded at 568p.
Both sides refused to give any guidance last night. A source close to Cadbury said: "The ball is in their court. They've got until 5pm to put up or shut up."
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