US giant Kraft Foods has launched a £10.2 billion (Dh61.3bn) takeover bid for Cadbury but the British confectionery maker has rejected the offer.
Cadbury rejects £10bn Kraft bid
US giant Kraft Foods on Monday launched a £10.2 billion (Dh61.3bn) takeover bid for Cadbury but the British confectionery maker has rejected the offer, Kraft Foods said. Kraft said it hoped Cadbury, whose share price surged more than a third in value following the bid announcement, would eventually come round as the US company looks to increase annual revenues to $50bn a year. A tie-up would merge leading Kraft brands Oreo biscuits and Maxwell House coffee with Cadbury's Dairy Milk chocolate and Trident chewing gum.
"Kraft Foods Inc. today announces that it has made a proposal to the Board of Cadbury plc to combine the two companies. The Board of Cadbury has rejected this proposal," said a statement issued by Kraft to the London Stock Exchange. The offer "values the entire issued share capital of Cadbury at £10.2 billion," it added. Shares in Cadbury shot up 38.73 per cent to 788 pence soon after the announcement.
Kraft Foods said it had proposed 300 pence in cash and 0.2589 new Kraft Foods shares per Cadbury share. This valued each Cadbury share at 745 pence, 31 per cent higher than Cadbury's closing share price last Friday. "This proposed combination is about growth," Kraft Foods chairman and chief executive Irene B. Rosenfeld said in the statement. "We are eager to build upon Cadbury's iconic brands and strong British heritage through increased investment and innovation."
She added: "We hope to engage with the Board of Cadbury on a constructive basis with the goal of consummating a recommended transaction." Kraft Foods said a tie-up would lift its revenues to about $50bn a year from $42bn at present. It added that by combining the groups, plans for job cuts at Cadbury in Britain would be scrapped. "Our current plans contemplate that the UK would be a net beneficiary in terms of jobs. For example, we believe we would be in a position to continue to operate the Somerdale facility, which is currently planned to be closed, and to invest in Bournville, thereby preserving UK manufacturing jobs," Kraft said.
Kraft also makes Dairylea cheese, Kenco coffee and Toblerone chocolate. Cadbury recently posted a tripling of half-year net profits thanks to a strong performance in emerging markets and its chocolate division. Cadbury's profits after tax hit £313m in the six months to June compared with £113m in the same period of 2008. Revenues advanced 13 per cent to £2.77bn. Cadbury last year completed the demerger of American Beverages. Prior to the split, Cadbury was known as Cadbury Schweppes. The US business, which has been renamed Dr Pepper Snapple Group, is listed on the New York Stock Exchange.