Kraft gets Cadbury Board approval for $21 billion takeover
Kraft Foods and Cadbury have reached an amicable takeover agreement overnight that is now only pending shareholder approval in the absence of a counterbid from potential suitor Hershey.
In a change of heart on Monday, prominent members of the Cadbury leadership team met with Kraft CEO Irene Rosenfeld to work toward a revised offer that the Cadbury Board would accept. That revised offer – valuing the company at around 11.9 billion pounds or A$21b – has now been unanimously recommended by the board of Cadbury.
Last week Cadbury Chairman Roger Carr urged shareholders not to let Kraft “steal” the company but the new proposal – valuing the British icon at 13 times 2009 earnings – has received his full support.
“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,” he said. “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, which was keen on Cadbury due to the enviable position in developing markets like India, insisted that the deal ensures both Kraft and Cadbury shareholders come out as winners.
“We have great respect for Cadbury’s brands, heritage and people,” Ms Rosenfeld explained. “We believe they will thrive as part of Kraft Foods. This recommended offer represents a compelling opportunity for Cadbury Shareholders, providing both immediate value certainty and upside potential in the combined company.
“For Kraft Foods Shareholders it transforms the portfolio, accelerates long-term growth and delivers highly attractive returns, while maintaining financial discipline.”
The combination of the two companies will create a confectionery business that will rival market leader Mars, with over 40 confectionery brands that have annual sales over $100 million. Cadbury shareholders have until February 2 to accept the proposal, with Kraft only able to increase the value of their offer if a new bidder emerges.
At this stage it appears unlikely that Hershey – the only likely contender – will enter the race.