US food giant Kraft to swallow up Britain's Cadbury - Summary

London - US giant Kraft Foods, one of the world's biggest food companies, said Tuesday it had reached a deal worth 11.5 billion pounds (19 billion dollars) to swallow up Cadbury, the iconic British chocolate maker founded in 1824. As a bitter six-month takeover battle came to an end, Kraft said it believed that the link-up would create a "global confectionery leader" with a portfolio of 40 brands - including such well-known products as Toblerone, Oreos and Cadbury's Dairy Milk.

Cadbury's board advised shareholders to accept the new offer, which was about 1 billion pounds more than the initial bid made by Kraft late last year and values the British firm at 840 pence a share. In trading in London Tuesday, Cadbury shares were up by 3.5 per cent.

Shareholders have until February 2 to back the deal that is set to end Cadbury's history as an independent company dating back to 1824.

"We have great respect for Cadbury's brands, heritage and people. We believe they will thrive as part of Kraft Foods," said Irene Rosenfeld, chief executive of Kraft Foods in a statement released by both firms.

Kraft Foods and Cadbury had a "highly complementary geographic footprint, enabling the combined group to attain a leading position in developing markets, including Brazil, Russia, India, China and Mexico, the statement said.

Roger Carr, chairman of Cadbury, said that Kraft's improved offer represented "good value for Cadbury shareholders" while the British firm was "pleased" with the commitment the US conglomerate had made to its "heritage."

Earlier, reports said Cadbury, the British confectioner founded by John Cadbury, a Quaker, in Birmingham 180 years ago, had agreed to the improved offer after a "frantic night of negotiations."

Cadbury had initially bitterly resisted the approaches by the US giant, saying it "seriously undervalued" the British firm which it hoped to "acquire on the cheap."

In December, Kraft filed a hostile takeover bid for Cadbury, after the British company's board rejected a 10.4-billion-pound offer, snubbing Kraft's previous offer of 769 pence as "derisory."

Cadbury's management attempted to mobilize US chocolate maker The Hershey Company and Italy's Ferrero SpA to counter Kraft's offer, but failed to get sufficient finance.

Kraft's brands range from Philadelphia Cream Cheese to Milka chocolate, while Cadbury produces its signature Dairy Chocolate and Bourneville brands.

The EU's competition watchdogs are expected to order Cadbury to sell part of its chocolate business in Eastern Europe if the merger goes through.

Kraft and Cadbury's joint sales would amount to some 72 billion dollars, closing up to world market leader, Switzerland's Nestle SA.

Nestle is taking over Kraft's frozen pizza unit, which the US company sold to be able to finance the Cadbury deal. Reports in Britain said Kraft will borrow 7 billion pound to finance the deal.

However, the deal comes with risks for Kraft, which is facing resistance from stakeholders, including Warren Buffet's Berkshire Hathaway, the company's largest shareholder, who worry that Kraft is paying too much for Cadbury.

In Britain, one of Cadbury's biggest shareholders, insurer Standard Life, indicated that it would agree to the deal despite earlier reservations over the price tag.

"Kraft are getting a good deal. It's sad that Cadbury is gone, but business is business," David Cumming, head of equities at Standard Life told the BBC.

Britain's Unite trade union said it estimated that 7,000 jobs at Cadbury's could be threatened as Kraft had given "no specific assurances" over jobs.

Cadbury employs just under 6,000 staff in Britain and Ireland and a further 40,000 in 60 countries around the world. Kraft, founded as a cheese wholesaler in Illinois in 1903, has 98,000 employees and 168 manufacturing and processing sites around the world.

Source: Earth Times.
Link: http://www.earthtimes.org/articles/show/304651,us-food-giant-kraft-to-swallow-up-britains-cadbury--summary.html.