Kraft Launches Hostile Takeover Bid for Cadbury

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Kraft Foods Inc. formally launched a hostile takeover bid for British candymaker Cadbury today. The Wall Street Journal has more:

Cadbury Sept. 7 rejected Kraft’s initial cash-and-share offer, worth 745 pence per share at the time and at around 722 pence at current values. Cadbury said it could offer its shareholders more value by pursuing its standalone strategy of organic growth and expansion abroad. It accused Kraft of being a “low growth conglomerate” that contrasted with its own strategy of being a pure play confectionary company.

Kraft wants to acquire Cadbury to gain better scale to compete with global confectionary competitors like Mars Inc. and Nestle SA. A deal would help Kraft boost sales by better tapping the rapidly expanding populations in developing countries. It says a takeover would offer Cadbury better global reach and would also preserve jobs at Cadbury’s U.K. operations.

Kraft’s cash and shares offer values Cadbury at £9.8 billion ($16.3 billion). That is below the £10.2 billion initial approach from Kraft because Kraft’s share price has fallen in the interim.

The initial approach was criticized by some Cadbury shareholders for being too low and was rejected by the company. Cadbury has now rejected the formal offer, saying it fundamentally undervalues the company.

Kraft backed its decision not to sweeten the offer by saying it hasn’t seen any signs of a competing offer for the British company and it therefore offers the best value to Cadbury’s shareholders.

British takeover rules give Kraft 28 days to publish a shareholder prospectus on the offer. After publishing the prospectus, Kraft has up to two months to acquire enough shares to close the deal, according to the article. If and when Kraft does buy Cadbury, it will become the second-largest confectionary in the world, trailing behind Mars Inc, the article says.

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