Kraft Foods Inc, the world’s second-largest food maker, may increase its 9.8 billion-pound ($16 billion) bid for confectioner Cadbury Plc by Monday’s deadline to keep its takeover attempt alive.
Kraft proposed 300 pence in cash and 0.2589 new Kraft share per Cadbury share on August 28, an offer worth 717 pence based on November 6 closing prices. Cadbury rejected that as an “unappealing prospect” from a “low-growth” conglomerate. UK regulators set a November 9 deadline for Kraft to make a formal offer or walk away for six months.
“If they try anything less than 800 pence, people will yawn and say ‘go away’”, John Haynes, an equity strategist at Rensburg Sheppards Plc in London, which holds Cadbury shares, said. “I’m surprised we haven’t seen any expressions of interests from anybody else, so I expect them to make a bid.”
The Northfield, Illinois-based maker of Ritz crackers and Oreo cookies has said it seeks to build on its position as a “global powerhouse” with combined annual revenue of about $50 billion. Cadbury, the maker of Creme Eggs and Trident gum, is the world’s second-largest candy and chocolate maker. Combined, they would overtake leader Mars Inc, based on data from researcher Euromonitor International.
Cadbury shares fell 4 pence to 758 pence on November 6 in London trading. Kraft declined 25 cents to $26.78 in New York Stock Exchange composite trading.
Representatives for Kraft and Cadbury declined to comment.
Cadbury would give Kraft a sales channel in the UK and access to developing markets such as India. At the initially proposed price, the acquisition would be the biggest cross-border deal this year as companies revisit merger plans shelved during the credit crisis now that the recession has eased.
Investors including Franklin Resources Inc, the biggest investor in Cadbury, await Kraft’s next move. Anne Gudefin, a Franklin fund manager, said it targeted the UK confectioner as a takeover candidate before Kraft Foods’ unsolicited approach.
“We have an idea” of a bid price for Cadbury that would be acceptable, Gudefin said on November 5, with regard to her $15.1 billion Mutual Global Discovery Fund. That held 19.7 million Cadbury shares as of September 30, according to Bloomberg data. She didn’t disclose the fund’s preferred price range.
“Cadbury is a company that nobody liked a year ago” when her fund bought “quite a lot” at around 525 pence and 550 pence per share, she said.
Franklin Resources’ funds in total held almost 104 million Cadbury shares as of November 2, according to Bloomberg data. Gudefin said she wasn’t speaking for the entire company. Kraft Chairman and Chief Executive Officer Irene Rosenfeld said the company will remain “disciplined” in its pursuit.
“With or without Cadbury, Kraft Foods is well-positioned,” she said on November 3.
