Sweeter Kraft bid as Nestle pulls out
By Michele Gershberg and Sam Cage |
January 6, 2010, Wednesday
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Print Edition
Print Edition
HOPES of a takeover battle over British confectioner Cadbury have receded as Nestle ruled itself out as a suitor and Kraft sweetened its hostile 10.2 billion pound (US$16.4 billion) offer.
Shares in Cadbury fell as much as 2.4 percent after Switzerland's Nestle, the world's biggest food group, said it did "not intend to make, or participate in, a formal offer" for the company.
Kraft, meanwhile, sought to win over Cadbury shareholders by offering to use the full net proceeds from a US$3.7 billion sale of its North American frozen pizza unit to Nestle to raise the cash portion of its offer by 60 pence a share to 360 pence. It kept the overall size of the offer unchanged by reducing the share element by an equivalent amount.
"Kraft Foods is doing this because of the desire expressed by some Cadbury security holders to have a greater proportion of the offer in cash," Kraft said. The United States company added that some of its own shareholders had asked it be "more sparing" in its use of Kraft shares in its bid.
Cadbury has so far rejected Kraft's share and cash offer.
It has described Kraft's approach as derisory, while investors in the company have said Kraft would need to substantially raise the bid to attract their interest.
"This doesn't really change anything. It was never really the form of the deal that was the problem, it was always the price," said one Cadbury investor. Some investors have, however, said in the past that a higher cash component would make the Kraft's offer more palatable.
Kraft said it will give detailed terms of the alternative bid by January 19, the last day Kraft is allowed to amend its cash offer under British takeover rules. The US food maker also extended its deadline for shareholders to accept its offer to February 2.
The Kraft offer will allow Cadbury shareholders to opt for more cash in lieu of some of the new Kraft shares they would have been entitled to.
The price at which Cadbury shareholders can opt for a higher cash portion will be set as the market price of Kraft shares, translated into pounds sterling, at the close of business the day before Kraft announces the terms of the cash alternative.
Some analysts think another suitor might still emerge, however.
US-based Hershey and Italy's Ferrero are still both waiting on the sidelines.
Shares in Cadbury fell as much as 2.4 percent after Switzerland's Nestle, the world's biggest food group, said it did "not intend to make, or participate in, a formal offer" for the company.
Kraft, meanwhile, sought to win over Cadbury shareholders by offering to use the full net proceeds from a US$3.7 billion sale of its North American frozen pizza unit to Nestle to raise the cash portion of its offer by 60 pence a share to 360 pence. It kept the overall size of the offer unchanged by reducing the share element by an equivalent amount.
"Kraft Foods is doing this because of the desire expressed by some Cadbury security holders to have a greater proportion of the offer in cash," Kraft said. The United States company added that some of its own shareholders had asked it be "more sparing" in its use of Kraft shares in its bid.
Cadbury has so far rejected Kraft's share and cash offer.
It has described Kraft's approach as derisory, while investors in the company have said Kraft would need to substantially raise the bid to attract their interest.
"This doesn't really change anything. It was never really the form of the deal that was the problem, it was always the price," said one Cadbury investor. Some investors have, however, said in the past that a higher cash component would make the Kraft's offer more palatable.
Kraft said it will give detailed terms of the alternative bid by January 19, the last day Kraft is allowed to amend its cash offer under British takeover rules. The US food maker also extended its deadline for shareholders to accept its offer to February 2.
The Kraft offer will allow Cadbury shareholders to opt for more cash in lieu of some of the new Kraft shares they would have been entitled to.
The price at which Cadbury shareholders can opt for a higher cash portion will be set as the market price of Kraft shares, translated into pounds sterling, at the close of business the day before Kraft announces the terms of the cash alternative.
Some analysts think another suitor might still emerge, however.
US-based Hershey and Italy's Ferrero are still both waiting on the sidelines.
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