Shareholders in Cadbury to chew on offer

CADBURY shares closed 3.6 per cent up at 836.5p yesterday after US food group Kraft announced its £11.7bn takeover bid had been recommended by the board.

Under the offer, Cadbury investors will receive 500p and 0.1874 new Kraft Foods shares for every share, plus a special dividend of 10p. Shareholders have until 2 February to decide on the offer, with 50 per cent approval needed to continue.

Around £7bn of cash would be returned to equityholders by mid-February, which would be put to work elsewhere in the UK market.

While employees at Cadbury’s original factory in Bournville reacted with dismay to the news, both companies insisted the arrangement was the best way to forge ahead.

Kraft boss Irene Rosenfeld told reporters: “We have great respect for Cadbury’s brands, heritage and people. We believe they will thrive as part of Kraft Foods.”

Cadbury chairman Roger Carr said: “We believe the offer represents good value for Cadbury shareholders. We will now work with Kraft Foods’ management to ensure the continued success and growth of the business.”

Analysts said they were surprised at how easily Cadbury appeared to have given in to Kraft after five months’ refusal. It is thought the turning point came when Franklin Templeton, the firm’s largest shareholder, told the board it would be prepared to back a Kraft bid at 830p or above. Kraft’s shareholders are not able to vote on the deal as the stock component of the revised offer is less than 20 per cent of Kraft’s issued share capital.
● 28 August
Kraft makes an informal approach to the British chocolatier, which is rebuffed.

● 7 September
The London market wakes up to a surprise £10.2bn cash-and-shares bid from Kraft which values Cadbury at 745p per share. The offer is dismissed by Cadbury chairman Roger Carr who says it “fundamentally undervalues” the business.

● 22 September
Cadbury asks the Takeover Panel to impose a “put up or shut up” order.

● 30 September
The Takeover Panel gives Kraft until 9 November to make a formal bid.

● 21 October
Cadbury ramps up its defence by raising its sales and profit margins and warning of the effects of assimilation into a larger, slower-growing conglomerate.

● 9 November
Kraft goes hostile with its bid but keeps it at the same level, now worth £9.8bn due to Kraft’s shares falling since August.

● 18 November
Rumours circulate of a white knight joint bid from Ferrero Rocher and Hershey.

● 4 December
Kraft’s Irene Rosenfeld sets the 60-day takeover clock ticking by sending a 180-page circular to Cadbury shareholders.

● 14 December
Cadbury puts out its official defence to Kraft’s bid, again raising its targets and promising shareholders higher dividends.

● 5 January
Kraft ups the ante by raising £2.3bn from the sale of its frozen pizza arm to Nestlé, but is undermined by shareholder Warren Buffett who warns against overpaying.

● 7 January
Cadbury holds informal talks with Hershey about a white knight deal.

● 12 January
Carr fronts Cadbury’s last-ditch defence, asking shareholders not to let Kraft “steal your company” and forecasting seven per cent sales growth in 2010.

● 17 January
As Kraft’s bidding deadline looms, Cadbury fears shareholders will plump for an offer above 830p per share and begins friendly talks in a London hotel.

● 18 January
Cadbury’s board recommends Kraft’s £11.7bn bid.

A HARD core of 60 bankers, lawyers and advisers worked through the night on Monday to seal Cadbury’s recommendation of the Kraft bid. Although they were fired up on adrenaline, the seven firms contracted to help the two parties are expected to earn around $100m (£61bn) for their efforts throughout the takeover battle, which has simmered for five months.

On the Cadbury side, Goldman Sachs, Morgan Stanley and UBS will share between $50m and $56m, according to estimates. Kraft’s advisory team of Lazard, Centerview, Citigroup and Deutsche Bank will split between $53m and $58m.

Key figures in the Cadbury corner include “City superwoman” Karen Cook, who juggled the demands of six children with leading Goldman Sachs’ defence team; Morgan Stanley star Simon Robey, who previously helped miner Rio Tinto fight off a hostile bid from BHP Billiton; and the trio of Nick Reid, Tim Waddell and James Robertson at UBS.

The Lazard team was originally led by the late Bruce Wasserstein, the legendary Wall Street dealmaker. After he passed away in October, colleagues such as Antonio Weiss, Peter Kiernan, Jeffrey Rosen and William Ruckner stayed on the deal. They were accompanied by James Agnew, chairman of Deutsche Bank’s broking business, and David James, Citigroup’s joint head of UK capital markets.

The stakes were high when Cadbury chairman Roger Carr met Kraft boss Irene Rosenfeld for the second time at the Lanesborough Hotel at Hyde Park corner on Monday. Having spoken to the Cadbury board from the chocolatier’s Berkeley Square offices, Carr was determined not to take less than 850p per share. Against the expectations of some of Cadbury’s advisers, Carr walked out of the hotel at 9pm having sealed the deal.

Carr and his chief executive Todd Stitzer made for Lazard’s plush headquarters in Mayfair. There, Kiernan and Ruckner worked out the small print of the offer.

Cadbury’s resistance to Kraft’s offer had been spirited. Twice Carr raised the group’s targets, and countless times he asked investors not to let a corporate titan “steal” the company. But as the various parties negotiated late into the night, Carr was said to have been courteous and consistent. It is understood the process – which could have been fraught with emotion – was a smooth one.