Kraft Foods Inc is set to become the top chocolate and confectionery maker in India, a market it has long coveted but has so far had a negligible presence in.
Kraft Foods Inc is set to become the top chocolate and confectionery maker in India, a market it has long coveted but has so far had a negligible presence in.
The Illinois, US-based company on Tuesday made a revised offer of £11.9 billion ($19.7 billion) to acquire Cadbury Plc.
The Cadbury board accepted the offer and recommended it to its shareholders, ending more than four months of resistance to a takeover by Kraft. It even agreed to pay a break fee of £117.7 million if it withdraws the recommendation.
As per the plan, Cadbury investors will get 840 pence a share, including 500 pence in cash and the rest in stock. Cadbury will also pay its shareholders an additional 10-pence dividend once the offer is unconditional. The revised bid is about 9% higher than Kraft’s previous bid of 769 pence, and consists of 40% stock and 60% cash.
Should the deal go through, Kraft will displace Mars Inc as the world’s biggest candy maker, according to Euromoniter data. It will create a company with about $50 billion in annual sales, adding Cadbury’s Creme Eggs and Trident gum to Kraft’s Oreo cookies.
In India, the deal would give Kraft Cadbury’s distribution network for its beverages, cheese, dairy products and snacks in addition to Cadbury’s chocolates, thereby helping it to take on Nestle.
Cadbury India, which has seen revenues grow by more than 20% and profit after tax by more than 40% in the last couple of years, got delisted from the exchanges in 2003.
Sources, however, said the company would not be a wholly owned unit of Kraft as there are still some minority shareholders.
Going by sources, of the company’s Rs 1,588 crore-odd revenues in 2008, around Rs 1,200 crore came from chocolates, compared with around Rs 700 crore for rival Nestle.
The increased offer values Cadbury at 13 times 2009 earnings before interest, tax, depreciation and amortisation, according to Kraft’s statement.
The acquisition will generate pretax cost savings of at least $625 million annually by the end of its third year, at a cost of $1.3 billion, Kraft said. The deal will add to Kraft’s 2011 earnings per share by 5 cents, and the company will lift its long-term sales growth target to at least 5% from at least 4% previously, the company said in the statement.
Kraft expects to revise its long-term earnings per share target will increase by 9% to 11%, more than the previous 7-9% range.
Kraft chief executive officer Irene Rosenfeld increased the original bid after London-headquartered Cadbury rejected it as “derisory” and Hershey Co prepared to mount a rival offer.
Analysts feel a rival bid from Hershey is unlikely now.
Hershey and Ferrero SpA, who have said they are considering their options, must clarify whether they intend to make a firm offer for Cadbury by January 25, the UK Takeover Panel said on Tuesday. A Ferrero spokesman declined to comment.
As recently as January 14, Cadbury called Kraft an “unfocused conglomerate” with businesses in “unappealing categories.” Kraft had to raise its bid to at least 850 pence to win over Cadbury investors, according to a Bloomberg survey of nine shareholders.
Rosenfeld faced pressure from her own shareholders to get the price right. Billionaire investor William Ackman last week joined Warren Buffett, Kraft’s biggest shareholder, in saying Kraft risked diminishing the merits of a Cadbury takeover by issuing too much stock to pay for it. Rosenfeld declined to discuss any conversation with Buffett in Tuesday’s interview.
(With Agencies)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}