As expected, US giant Kraft has sweetened its £10bn offer for Cadbury; it hasn’t actually increased its valuation of the UK chocolate-maker, but it’s offering to pay a bigger chunk of the deal in cash. Intriguingly, it has raised the money by flogging its US pizza business to Nestle; some had been hoping the latter might emerge as a rival bidder for Cadbury (particularly after it came into £17bn yesterday), but Nestle said today that it ‘does not intend to make, or participate in, a formal offer for Cadbury’. So who’s going to push the price up now?
Kraft made $3.7bn by selling the pizza business to Nestle, and immediately said it would use the proceeds to sweeten the terms of its Cadbury bid: it will raise the cash component of the offer – currently 300p a share – by 60p, the idea being to give vacillating shareholders a bit more certainty. It also argued that its own shares are now undervalued as a result of this takeover row, so it wants to use fewer of them in the deal.
Unfortunately – at least as far as the Cadbury board is concerned – this doesn’t affect Kraft’s overall valuation of the UK firm, which was always the point at issue. So it’s no surprise that Cadbury has been equally dismissive of this revised offer, with a spokesman telling the Telegraph that ‘Kraft has once again missed the point’. Despite this ‘tinkering’, he said, the offer was still ‘unchanged and derisory, with less than half the consideration in cash,’ he growled. So they won’t be opening the books just yet.
The problem Cadbury has is that in the absence of other bidders, Kraft has no real incentive to pay more. Nestle was seen as one possible alternative, particularly after swelling its Alcon stake yesterday, but it now seems to have ruled itself out (albeit with some wiggle room to get involved later on, should its ‘intentions’ change). Still, perhaps that’s no bad thing: since Nestle makes so much chocolate in the UK already, there’d be big competition problems if they bought Cadbury. And is it really so much more attractive a proposition than Kraft anyway?
Either way, Cadbury appears once again to be relying on Hershey and/ or Ferrero. Or on persuading its shareholders not to sell at all and keep the company independent...
In today's bulletin:
John Lewis and Next bring festive cheer with bumper sales
Kraft sweetens Cadbury bid as Nestle distances itself
AOL Time Warner boss apologises for 'worst deal of the century'
Editor's blog: Paddy Power has a funny idea of the 'craic'
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