Cadbury to accept takeover bid from Kraft

by Laura Roberts - 19/01/2010

"Cadbury will be taken over by US food maker Kraft ending more than 150 years of independence for the British chocolate company. "

The £11.7bn deal with the maker of Dairy Milk will mark the biggest British takeover since the credit crunch began and one of the most significant in the world.

The two companies confirmed that their boards were "finalising the terms of a recommended offer".

They are expected to announce a deal worth up to 850p a share for control of the maker of Creme Eggs and Crunchie chocolate bars after Kraft agreed to raise its 771p a share offer in a bid to win over Cadbury shareholders.

If the sale goes ahead Kraft, which has sales of £25.7 billion a year compared with Cadbury's £6 billion, will become one of the biggest food and confectionery businesses in the world.

"The major hurdles have been cleared – it's just about finalising the details," one source said. "We should be in the home straight."

Kraft was expected to table a higher hostile offer yesterday but is understood to have shelved its plans after opening talks with Cadbury. The US company, which makes Oreo cookies and Philadelphia cheese, must submit its best and final offer for Cadbury by 5pm today.

The news is unlikely to please Felicity Loudon, the great grand-daughter of George Cadbury, the company's founder, who previously described Kraft as "that American plastic cheese company".

She has said: "My fear is this will all become history and it will be too late. I think the predators are circling. It's desperately sad that yet another British icon could go abroad."

In December last year a coalition of MPs, unions and employees called on Cadbury shareholders not to accept a Kraft bid.

They pointed out that both Rowntree and Frys were acquired by foreign competitors who pledged autonomy for the British firms, only to eventually consign them to history. The Rowntree name was abolished in 2008 and Fry's, owned by Kraft, closed its York factory in 2004.

Irene Rosenfeld, Kraft's chairman and chief executive, has held talks with Cadbury shareholders in recent days to determine at what price they would be willing to sell.

Kraft had previously faced pressure from Warren Buffett – its leading shareholder – not to overpay for the UK company after the US group raised extra funds earlier this month when it sold its North American pizza business to Nestlé, the Swiss food giant, for £2.3billion.

Cadbury's shares were trading at 568p before Kraft's initial approach was revealed last September.

However, Kraft could still face resistance from some quarters. Standard Life Investments, one of Cadbury's largest UK shareholders, said yesterday that it would not accept an offer of less than 900p a share.

"If Kraft want to get Cadbury they need to pay a full price to get long-term shareholders," David Cumming, head of UK equities at Standard Life told the BBC's Radio 4. "That price would have to be above £9 a share."

A successful takeover will raise fears of widespread job cuts at Cadbury, which employs more than 6,000 staff in the UK and 46,500 worldwide. Cadbury sites in Bournville, Birmingham and Somerdale, Bristol could be among those locations hit.

Cadbury was founded in Birmingham in 1831 but has grown to become the world's largest confectionery group.

Together with the Rowntree's and Frys of York, the Cadburys were at the heart of a Quaker triumvirate of teetotal confectioners that mixed the allure of chocolate as an alternative to alcohol with a social revolution.

George Cadbury created the Bournville village which provided high-quality housing at a low-cost to his employees with garden's and allotment. He said: "No one should live where a rose cannot grow."

In 1969 Cadbury merged with Schweppes, ending the ownership of the Cadbury family.

The company, which generated global revenue of £5.3billion in 2008, announced the closure of its factory at Keynsham, Somerset, with the loss of 500 to 700 jobs as part of a project to move production to Poland.

More Details: http://www.telegraph.co.uk/finance/newsbysector/epic/cbry/7024524/Cadbury-to-accept-takeover-bid-from-Kraft.html