Tags : cadbury, kraft
Cadbury Rejects $16.7 Billion Kraft Offer
London, England (AHN) – Chocolate maker Cadbury on Monday rejected a $16.7 billion takeover bid from American competitor Kraft Foods. Kraft said it continue acquisition of the British firm.
Kraft had proposed a bid of 300 pence, or $4.92, in cash and 0.2589 of a share for each Cadbury share for a total offer of 7.45 pounds, or $12.21 a share.
At 10:20 a.m. EDT, Cadbury (UK:CBRY) was up 222.00, or 39.08 percent, to 790.00 in London. Kraft (KFT) was last up 0.11, or 0.39 percent, to $28.10. U.S. markets were closed Monday for Labor Day.
In rejecting the offer, Cadbury’s board of directors said in a statement that “The Board is confident in Cadbury’s standalone strategy and growth prospects as a result of its strong brands, unique category and geographic scope and the continued successful delivery of its Vision into Action plan. The Board believes that the proposal fundamentally undervalues the Group and its prospects.”
The merger attempt comes after Cadbury closed factories around Europe as part of a four-year plan designed to raise the company’s operating margin to a mid-teens percentage by 2011.
Kraft’s offer is backed by some of America’s most dynamic businessmen. Warren Buffett, chairman of Berkshire Hathaway, is Kraft’s largest investor. Nelson Peltz, who forced Cadbury to sell its Dr Pepper division in 2008, has a stake in both Kraft and Cadbury.
“This proposed combination is about growth,” Kraft Chairman and Chief Executive Officer Irene B. Rosenfeld said in a statement. “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. Cadbury’s brands, which are highly complementary to our portfolio, would benefit from Kraft Foods’ global scope and scale and array of proprietary technologies and processes.”
Kraft estimated the combined companies could generate about $50 billion in revenue. Currently Kraft is the world’s second largest food company with annual revenues of $42 billion. The company estimated the merger would realize pre-tax cost savings of at least $625 million annually.
Analysts expected that the Cadbury’s rejection of the big would arouse interest from other food makers such as Nestle, Mars or Hershey.
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