Kraft buy Cadbury

Cadbury is to be taken over by the US food company Kraft after its board approved a new increased bid.

The Cadbury board has advised its shareholders to accept a new offer of 840 pence a share - valuing the company at £11.5bn ($18.9bn).

Kraft said the deal would create a "global confectionery leader".

But there are renewed fears over possible job cuts at Cadbury's UK operations as a result of the agreed takeover.

Shareholders have until 2 February to give the deal their backing, with the US confectioner Hershey apparently out of the race.

The offer will consist of 500 pence in cash, with the rest made of Kraft shares. Kraft will borrow £7bn ($11.5bn) to finance the deal...

nions have expressed concerns that the Kraft takeover could cost jobs.

The company has given no specific assurances over UK jobs, though it says it wants to invest in the Bournville site and maintain production at Somerdale, near Bristol, also known as Keynsham.

It has not ruled out cuts, and staff numbers at Cadbury's head office in Uxbridge are expected to be reduced, according to the BBC's business editor Robert Peston.

Kraft also said it expected "meaningful cost savings" as a result of the merger.

Jennie Formby from the Unite union said the need for Kraft to cut costs could mean staff cuts in the longer-term.

"We are concerned about the levels of debt that Kraft has," she told the BBC.

"The sad truth is that when they have to pay down that debt, the soft option is jobs and conditions.

"When you have to make cost savings of the magnitude they will need to make, you have to ask where those cost savings will be made."

Those fears were shared by David Bailey, professor at Coventry University Business School.

"Serious questions need to be asked about Kraft's intentions," he said.

"Kraft already has a track record of cutting production and moving production abroad. There's no guarantee that they'll keep production in the UK in the long run."

After four months of pursuit, Kraft Foods announced the details Tuesday for a friendly takeover of Cadbury, whose board unanimously recommended the deal to its shareholders.

Under the final terms of the bid, Kraft, the U.S. food giant, is offering Cadbury shareholders 500 pence cash and 0.1874 new Kraft shares for each share of the British confectioner.

In all, Kraft will pay 840 pence, or $13.80, a Cadbury share, making the deal worth about £11.9 billion, or $19.5 billion, while Cadbury will pay out the special 10 pence a share dividend, confirming what sources had told DealBook on Monday.

The offer is about a 5 percent premium over Cadbury’s closing share price of 807.5 pence on Monday. The majority of the increase was in the cash component, which was raised from £3 a Cadbury share to £5.

Uniting Kraft, maker of Oreo cookies and Ritz crackers, with the producer of Trident gum and Dairy Milk chocolates, would create a global food giant with more than $50 billion in revenue and a big presence in markets from the United States to India.

Over the last decade, food companies have sought to gain scale by combining with each other, most recently with Mars buying the William Wrigley Jr. Co. in 2008 for $23 billion.

After dismissing Kraft’s approach for months as inadequate, Roger Carr, chairman of Cadbury, said in the joint statement that “the offer represents good value for Cadbury shareholders.”

Irene Rosenfeld, chairman and chief executive of Kraft, said that for her company’s shareholders, the deal “transforms the portfolio, accelerates long-term growth and delivers highly attractive returns.”

Cadbury shareholders who decide to accept the offer must do so by 1 p.m. London time on February 2.

It was the last day Kraft can raise its offer under British takeover rules. While the terms of the offer are “final,” Kraft has the right to raise its bid if a rival offer is made.

From the beginning, speculation mounted among investors that another bidder could step in, forcing Kraft to raise its original offer. Representatives for Cadbury have held talks with Hershey, the American company whom Cadbury viewed as a preferable merger partner, according to people briefed on the matter.

For Hershey, buying Cadbury would prevent it from being relegated to a mostly U.S. company. Hershey moved closer to making a bid in recent days, lining up more than $10 billion in financing, these people said.

Hershey had been waiting for Kraft to unveil its final offer on Tuesday before it made its final decision on a bid, but analysts have said that Hershey would most likely be unable to top the much larger Kraft in a bidding war. Other potential suitors, including Nestlé of Switzerland and Ferrero of Italy, dropped out.

The deal draws to a close an often acrimonious hostile takeover battle between the two food companies, one that began with Kraft making public an unsolicited $16.7 billion bid for Cadbury in early September. The Cadbury management quickly derided the offer as too low and dismissed the prospect of being absorbed into what it called a slow-growing food conglomerate.

A takeover of the 186-year-old Cadbury, especially by an American multinational like Kraft, will most likely send shudders throughout Britain.

Politicians and unions have pointed to both a loss of jobs — the Unite labor union has estimated that as many as 30,000 jobs could be lost — and of national pride.

Despite Kraft’s strong desire to gain control of Cadbury, its chief executive, Irene Rosenfeld, vowed to keep the company disciplined in its bidding and to maintain its investment-grade credit rating. Still, Kraft began raising its original offer earlier this month, increasing the cash portion of its bid after selling its North American frozen pizza business to Nestlé for $3.7 billion. Rosenfeld met with Cadbury shareholders in London last week to solicit their opinions.

The bid announced Tuesday does not require the approval of Kraft shareholders, Kraft said.

Warren E. Buffett, whose Berkshire Hathaway is Kraft’s largest shareholder, delivered an unusually public admonishment, has warned Kraft to avoid overdiluting its shareholders by issuing too many new shares.

William A. Ackman, who runs the hedge fund Pershing Square Capital Management and who has been amassing a big position in Kraft, has echoed Buffett’s concerns.

Dual wrote:tbh Cadbury chocolate isn't even that great, it's just the principle mayne. They're an institution.

Alvin Flummux wrote:Better Kraft than Hershey.

StayDead wrote:

Dual wrote:tbh Cadbury chocolate isn't even that great, it's just the principle mayne. They're an institution.

Dual oh my god I hate you so much.

Cadbury's chocolate is amazing!

Moggy wrote:Or at least will result in Poland being the land of (milk) chocolate.