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Cadbury Agrees To $19.6B Takeover By Kraft, Ending 4-Month Standoff

Posted On: 1/19/2010

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LONDON -- Cadbury agreed today to a takeover offer from Kraft valued at $19 billion. Kraft's original, unsolicited offer, made in September, was worth about $16.7 billion.

The merger of Kraft, the maker of Oreo cookies and Ritz crackers, and Cadbury, producer of Trident gum and Cadbury Creme Eggs, would form the world's largest confectionery company, with an estimated $50 billion in annual revenue.

Under the agreement, Northfield, IL-based Kraft will pay 500 pence in cash and offer 0.1874 new Kraft shares for each share of Cadbury. That amounts to a payment of 840 pence, or $13.80, per Cadbury share. Additionally, Cadbury will pay out a special dividend of 10 pence a share.

Cadbury had argued after rejecting Kraft's initial bid that it would prefer to remain independent, but its management acknowledged that they would consider any offer made at the right price. Hershey reportedly moved closer to making a bid in recent days by lining up more than $10 billion in financing. However, analysts predicted that the Pennsylvania-based confection giant would most likely be unable to top Kraft in a bidding war. Other potential suitors, including Switzerland's Nestlé and Italy's Ferrero, said they are no longer pursuing Cadbury.

Kraft had raised the cash portion of its offer earlier this month from 300 pence to 360 pence after selling its North America pizza business to Nestlé for $3.7 billion. Warren E. Buffett, whose Berkshire Hathaway is Kraft's largest shareholder, has warned Kraft to avoid overdiluting its stock by issuing too many new shares.

Today was the last day Kraft could raise its offer under British takeover rules. Cadbury shareholders now have until Feb. 2 to decide whether to accept it. While the terms of the offer are considered to be final, Kraft reserved the right to raise its bid if a rival offer were made. The U.S. food giant said the offer does not require the approval of its shareholders.

In the joint statement, the companies said Cadbury would benefit from the supply chain of a larger company, while Kraft would be able to push its products through Cadbury's distribution network in the developing world.

Separately, British Business Secretary Peter Mandelson said that he plans to meet with Kraft officials in the hope that they will lay out clear plans for continued investment in Cadbury's U.K. operations. The 186-year-old British institution has some 45,000 employees in 60 countries, including 5,600 in British and Irish plants.



Following are details, compiled by Reuters, of the Kraft/Cadbury deal and vital statistics of the combined company: The new company:

• will be No. 1 in the chocolate and confectionery industry by revenue, overtaking Mars;

• will have combined revenues of close to $60 billion, making it the world's second-biggest food group behind Nestlé;

• will have 40 confectionary brands that each have annual sales in excess of $100 million;

• will have a leading position in developing markets, including Brazil, Russia, India, China and Mexico;

• will see such Cadbury brands as Dairy Milk bars, Roses chocolates, Trident gum and Halls cough drops join Kraft's Toblerone and Milka chocolate bars and Oreo cookies.