Kraft's offer softened by lack of rivals

CONFECTIONERY group Cadbury could get an improved takeover offer from suitor Kraft this week, although it may fall short of investors’ hopes due to a lack of rival bids.

It is understood the US maker of Dairylea cheese may make a £10.5bn offer for the Dairy Milk firm, higher than the £9.9billion offered by Kraft in September. A Kraft spokesman declined to comment.

Kraft, which posts third quarter results tomorrow, is under pressure to table an offer or walk away this week due to a Takeover Panel deadline for a bid of November 9.

Industry analysts said Kraft may need to offer as much as 850p to 900p to seal a deal, particularly if it needs to fend off interest from rivals like Hershey or Nestle.

But hopes for such an offer have waned in the absence of any indications of a competing bid.

Some Kraft investors say the company could now succeed with an offer closer to 820p.

Cadbury shares closed at 770.5p on Friday, while the Kraft offer is valued at around 731p.

Kraft reports third quarter earnings tomorrow and is expected to post earnings of 48 cents a share, up from 44 cents a year earlier. Analysts say Kraft must convince Cadbury investors it has the growth prospects to make taking its shares worthwhile.

Cadbury chairman Roger Carr dubbed Kraft a “low growth conglomerate” in his rejection letter to Kraft chief executive Irene Rosenfeld.

Bank of America Merrill Lynch said it was not expecting any news on Cadbury in Kraft’s results, although it said an 860p offer remained possible.

“Kraft shareholders are still not fully satisfied that the company has turned the corner on its transformation plan and thus not ready to successfully integrate Cadbury,” the broker said in a note.

07 September 09

Cadbury confirms and rejects approach from Kraft

14 September 09
Cadbury chairman Roger Carr writes to Kraft CEO Irene Rosenfeld labelling Kraft “low growth conglomerate”.

30 September 09
Takeover Panel imposes bid deadline on Kraft

09 November 09
Bid deadline

What happens next?
If Kraft says by Nov 9 that it intends to make a formal offer:
Kraft sets out the terms of its firm offer and has 28 days to send the formal offer documents to Cadbury's shareholders. The standard 60-day offer period kicks in.
Cadbury has to let its shareholders know what it thinks of Kraft's bid within the first 14 days of the offer period.
Kraft must make its final offer by day 46. It can increase the offer up to this date, but not lower it.
Cadbury shareholders have two more weeks to accept or reject it.