European Union (EU) regulators have approved Kraft Foods' takeover bid for Cadbury, provided that the US-based food major sell off the British confectioner's Polish and Romanian chocolate businesses.
The European Commission, EU's antitrust watchdog, gave the nod to Kraft's proposed over 10-billion pound hostile takeover bid yesterday on the condition that the US company divests Cadbury's Polish and Romanian chocolate businesses if the deal takes place.
"The decision (to approve planned Kraft-Cadbury deal) is conditional upon the divestment of the Polish and Romanian chocolate confectionary businesses of Cadbury.
"... The Commission has concluded that the operation would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it," the Commission said in a statement.
Kraft's takeover offer has been rejected by a majority of shareholders of Cadbury. The management of the British firm has declined the bid, saying that it undervalues the company.
Separately, Cadbury today said it would publish documents in defence against the Kraft's hostile offer on January 12. Another document with details of financial performance would be issued on January 14.
Interestingly, the European approval came amid media reports that Cadbury has discussed a rival offer, with American chocolate maker Hershey.
Attributing to people familiar with the matter, The Wall Street Journal said Cadbury board members have discussed with Hershey directors a rival offer.
Also, the report said, Cadbury board members have told the Hershey directors that they would support a bid by the Pennsylvania company and provided some guidance on the kind of price that would draw board support.
Kraft also faces another hurdle. Its top shareholder, Warren Buffett-led Berkshire Hathaway, has opposed the company's move to issue shares for Cadbury deal.
The European Commission has identified competition concerns within chocolate confectionery business in Poland and Romania, if the Kraft-Cadbury transaction materialises.
According to the agency, in Poland and Romania, the combined market share of Kraft/Cadbury "is particularly high and their brands are competing closely, in particular in the chocolate tablets markets".
To remedy these concerns, Kraft has committed to divest Cadbury's Polish confectionery business marketed under the Wedel brand and Cadbury's domestic chocolate confectionery business in Romania.
"In view of the remedies offered, I am satisfied that the proposed takeover would not adversely affect competition anywhere in Europe and that consumers would not be worse off," Competition Commissioner Neelie Kroes said.
Kraft yesterday revealed that just 1.52 per cent of Cadbury shareholders accepted its takeover offer as on January 5, the day when the US firm raised the cash component of its bid.
The company had offered three pounds and 0.26 new Kraft stocks for every Cadbury share. The firm has time till January 19 to make the final offer for the British entity.
