Kraft bid fails to woo Cadbury shareholders

Analysts said the US food firm will have to raise its offer above 800 pence per share if it is to win. Most investors are believed to be waiting until a January 19 deadline for Kraft to raise its bid before deciding whether to accept. Cadbury employs 800 people at a factory in Sheffield which is home to Bassett's Liquorice Allsorts.

Yesterday Kraft said it had a 1.52 per cent take-up from Cadbury shareholders for its 10.5bn ($16.8bn) bid. The acceptances came by its first closing date on Tuesday and its offer remains open until February 2.

Kraft's cash and shares bid is currently worth 765p per Cadbury share, against a share price which closed down 7p (0.9 per cent) last night at 772p.

Dirk Van Vlaanderen, an analyst at Jefferies International, said: "Kraft will have to offer at least 810 pence to attract acceptances from current Cadbury shareholders."

Martin Dolan at Execution Research said Kraft will have to offer more than 800 pence to encourage Cadbury to let it see its books and believes Kraft could pay an extra 60 pence per share.

Kraft's takeover bid suffered a blow on Tuesday when Warren Buffett's Berkshire Hathaway investment company, which owns 9.4 per cent of Kraft, said it had voted "no" to Kraft's proposal to issue up to 370 million new Kraft shares to help fund the Cadbury takeover. Berkshire, which is Cadbury's largest shareholder, may change its vote if it decides that the offer does not destroy value for Kraft shareholders.

The intervention of the legendary investor, as well as Swiss food group Nestle's earlier announcement it would not make a rival bid, had pushed Cadbury shares lower and Kraft stock higher. These narrowed the premium of Cadbury's share price to the bid price to around one per cent from nearly 10 per cent on Monday. Under Britain's takeover rules, Kraft has until January 19 to raise its bid while Cadbury shareholders have until February 2 to accept.

Cadbury, which operates in over 60 countries and employs more than 46,000 people, is waging a fierce battle to retain its independence and dismissed earlier bids from Kraft as an attempt to buy it "on the cheap".

Kraft has claimed there are major uncertainties about Cadbury's ability to meet its its long-term growth targets and says a merger would deliver more value "than Cadbury could achieve on its own".

It is also selling its North American frozen pizza business to Nestl for 2.3bn in order to fund the revised proposal. Hershey, the American chocolate firm which is controlled by a charitable trust in Pennsylvania, and Ferrero, based in Italy, have expressed an interest publicly in buying Cadbury and have until January 23 to come up with fully financed bids or withdraw.

Hershey already has a business relationship with Cadbury, holding a licence to make Dairy Milk bars and Cadbury Creme Eggs in the US.

A battle for independence

If Cadbury is sold it would bring to an end 186 years of independent ownership.

Workers have launched a campaign to fend off the hostile takeover bid from Kraft Foods and avoid potential job losses and pay cuts. They say Kraft's offer would saddle Cadbury with enormous debts and involve job losses and pay cuts to meet the American firm's massive borrowing needs for the bid. The Keep Cadbury Independent campaign, launched last month, is backed by Unite, Britain's largest trade union, and is backed by several MPs.

Todd Stitzer, chief executive of Birmingham-based Cadbury, has made its ethical credentials – the firm was founded by a Quaker family and its Dairy Milk bars are Fairtrade approved – a key plank of its defence. Mr Stitzer says its "principled capitalism" is essential to its work.