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Cadbury board gives green light to Kraft takeover

THE Cadbury board has recommended that its shareholders agree a takeover by American conglomerate Kraft Foods that values the maker of Dairy Milk and Twirl at £11.5bn.

It said the offer of 840p plus a 10p dividend per share represented good value.

The consensual deal is a dramatic finale to a takeover battle that has rumbled on since late August, and marks the end of Cadbury’s 186 years as an independent company.

Chairman of Cadbury Roger Carr said: "We believe the offer represents good value for Cadbury shareholders and are pleased with the commitment that Kraft Foods has made to our heritage, values and people throughout the world.

"We will now work with the Kraft Foods' management to ensure the continued success and growth of the business for the benefit of our customers, consumers and employees."

Kraft’s takeover offer was accepted after a day of negotiations between the two sides and their financial advisers, City A.M. has learned.

The first contact between the two parties was a one-to-one meeting between Kraft’s Irene Rosenfeld and Carr at a mutually agreed hotel in London’s west end. It followed a call from Rosenfeld to Carr in the morning of the final day Kraft had to raise its previous £10.5bn offer under the City’s Takeover Panel rules.

Carr, who has fought an aggressive campaign against selling Cadbury at anything below what he sees as its true value, made it clear to his US counterpart that he would not be prepared to recommend an offer between 820p and 830p. Discussions over the phone continued into the evening between Cadbury’s management, advised by Morgan Stanley, UBS and Goldman Sachs, and Kraft, advised by Lazard, Deutsche Bank and Citigroup.

Cadbury sources said last night that Kraft’s total offer of 850p per share – including the 10p dividend – was a 50 per cent premium to the level at which the Bournville-based chocolate maker’s stock was trading ahead of Kraft’s initial offer. “You only get what you ask for and Roger got what we wanted,” a Cadbury source said. The offer is composed of 500p in cash plus Kraft shares, which on Friday closed 1.6 per cent up at $29.58 (£18.06).

Although some shareholders had been holding out for as much as 900p per share, the backing of Cadbury’s board is likely to seal the deal. However, the assimilation of an iconic British brand into a larger American operator will be viewed as a blow to the government just days after Lord Mandelson met with institutional shareholders to encourage them to keep the firm independent.

The US confectionery giant is likely to hold all the major executive positions in the merged entity, with Cadbury chief executive Todd Stitzer and Carr expected to quit with payoffs. In 2008, Stitzer took home total compensation of just over £4m. There will be fears about the scale of likely job cuts among Cadbury’s 45,000-strong workforce.

Cadbury’s capitulation comes after a robust five-month defence. Carr described Kraft’s first offer of 745p per share as “derisory” and has consistently instructed investors not to let Rosenfeld’s firm “steal” the company.