Cadbury rejects bid from Kraft

Kraft Foods Inc. on Monday proposed a 10.2 billion pounds (US$16.7 billion) takeover of Cadbury PLC, but the offer was immediately rejected by the British maker of chocolate, gum and candy.

Kraft Foods Inc. on Monday proposed a 10.2 billion pounds (US$16.7 billion) takeover of Cadbury PLC, but the offer was immediately rejected by the British maker of chocolate, gum and candy.

Cadbury said the offer undervalued the company, and expressed confidence in its “standalone strategy and growth prospects as a result of its strong brands, unique category and geographic scope.” Kraft was undeterred, however, and said it would continue to seek a transaction which Cadbury’s board could support. Cadbury shares shot up 38 per cent to 785 pence on the London Stock Exchange.

Kraft, whose brands include Velveeta cheese product and Oreo cookies, said it had proposed paying 300 pence in cash and 0.2589 new Kraft Foods shares per Cadbury share, valuing Cadbury shares at 745 pence.

That represents a 31 per cent premium over Cadbury’s closing share price of 568 pence on Friday. Graham Jones, analyst at Panmure Gordon&Co., recommended that shareholders hold out for at least 800 pence a share.

“A key question is whether there is a counter bid, most likely from a Nestle-led consortium,” Jones said. “However, we see the most likely scenario being Kraft being successful on improved terms.”