Cadbury PLC Rejects Kraft Foods Inc. $16.7 Billion Merger Offer

Wednesday, September 09, 2009

Cadbury Chocolate Rejects Kraft Food Offers
International Food Producer, Kraft Foods Inc. on Monday (7 / 9), has proposed a takeover of chocolate and candy producer Cadbury PLC worth 16.7 billion U.S. dollars. However, Cadbury has rejected the offer. Cadbury shares has rose 41 percent to 803.5 pence, or Rp 133.000 in trading on the London Stock Exchange.

Cadbury said the offer is below the normal price. The chocolate company is also confident in their strategy to remain independent and growth prospects will remain good for a strong brand, unique category, and a strong geographical scope. Meanwhile, Kraft said it will not give up and continue working to improve the offers so that it can be supported by the board of directors of Cadbury.

Kraft, which produces food brands such as Velveeta, cheese, and Oreo cookies, said it had proposed to pay 300 pence (Rp 50.000) in cash and 0.2589 new shares of Kraft Foods stock for every Cadbury shares. Thus, Cadbury shares valued 745 pence (Rp 123.000) per share. This value is equivalent to 31 percent above the price of Cadbury shares trading at the close of last Friday, for 568 pence (Rp 94.250).

Cadbury's market share in the global confectionery industry by 10.3 percent in 2008. Cadbury took second place after Mars Inc. with 14.8 percent. As for Kraft in fifth place with a market share of 4.5 percent. Cadbury has a 28.4 percent market share in the global gum market, while Kraft is only 0.1 percent. Kraft, based in Northfield, Illinois, USA, said the combination with Cadbury would create huge power in the snacks market, sweets and fast food.

Graham Jones, analyst at Panmure Gordon & Co., recommends the shareholders to wait until the offer of Kraft rose at least to 800 pence (Rp 132.750) per share. "The question is, whether there is another offer that may be proposed by a consortium of Nestle. ujar Jones. The scenario, it appears Kraft will improve the offers," Jones says.

Jeremy Batstone-Carr at Charles Stanley & Co. even said that the possibility of offering price is above the 800 pence.
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