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Kraft in £10.2bn move for Cadbury
by Amy Wilson - 07/09/2009
"US giant Kraft Foods has proposed buying UK confectionery firm Cadbury in a £10.2bn ($16.7bn) move."
Kraft said that the purchase of the maker of Dairy Milk would protect jobs in the UK - including saving a factory earmarked for closure.
Cadbury, whose shares leapt 36% on the news, had "unequivocally" rejected the approach, Kraft said.
The US firm added it wanted to create "a global powerhouse in snacks, confectionery and quick meals".
Distribution savings
As well as Dairy Milk, Cadbury also owns the Green & Black's chocolate brand and Halls lozenges, Trident and Dentyne gum brands, and liquorice allsorts maker Bassett's. It span off its drinks division as a separate business last year.
Kraft's brands include Kenco coffee, Oreo biscuits, Terry's Chocolate Orange and Toblerone as well as cheese products such as Philadelphia and Dairylea.
The proposed deal would allow up to $625m a year to be saved in distribution, marketing and product development costs, Kraft said.
It added that Cadbury's brands were "highly complementary" to its portfolio and "would benefit from Kraft Foods' global scope and scale and array of proprietary technologies and processes".
'Iconic brands'
"As we have done, Cadbury has built wonderful brands by focusing on quality, innovation and marketing, but we believe the next stage in Cadbury's development will be challenging, given the increased importance of scale in the industry." said Kraft chairman Irene Rosenfeld.
"We are eager to build upon Cadbury's iconic brands and strong British heritage through increased investment and innovation. We have great respect and admiration for Cadbury, its employees, its leadership and its proud heritage."
Industry analysts have been speculating that there could be consolidation in the food sector.
Kraft said its possible offer - based on paying 745 pence for every Cadbury's share - was a 31% premium to its closing price last week and 42% more than the firm's shares were worth in early July, when speculation about possible deals in the sector intensified.
In a letter to Cadbury's, Ms Rosenfeld said it would be able to continue to operate its Somerdale factory in Keynsham, near Bristol, which is set to be closed, and also invest in its plant in Bournville, Birmingham, "thereby preserving UK manufacturing jobs".
More Details: http://news.bbc.co.uk/1/hi/business/8241056.stm
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