The FINANCIAL — Kraft Foods Inc., the world’s second-largest foodmaker, said Cadbury Plc rejected a proposed 10.2 billion-pound ($16.7 billion) offer which would create “a global powerhouse in snacks, confectionery and quick meals.”
The offer of 300 pence in cash and 0.2589 new Kraft Foods shares per Cadbury share values the U.K. candy maker at 745 pence a share, 31 percent more than the Sept. 4 closing price of 568 pence, Northfield, Illinois-based Kraft said on September 7.
Kraft said it is “committed” to its plan “and to maintaining a constructive dialogue and is announcing this proposal as a means to encourage and further that process.”
“It’s competitively priced, but I think they will have to go higher,” Martin Deboo, an analyst at Investec Securities, said by phone. He has a “hold” recommendation on Cadbury.
"Analysts said last year that Cadbury may be a target for Kraft, which in 2007 bought Groupe Danone SA’s biscuit unit for $7.8 billion to become Europe’s biggest cookie maker. Cadbury spun off its Dr Pepper beverages unit in May, 2008 to focus on confectionery brands like Dairy Milk chocolate and Wispa bars," Bloomberg informs.
Kraft said a combined company would have revenue of about $50 billion and have potential to realize annual pretax savings of $625 million at a cost of $1.2 billion over three years.
Growth Targets
A deal would be “accretive” to earnings in the second year after completion, the U.S. company also said. Kraft would expect to raise its long-term revenue growth target to more than 5 percent from over 4 percent should the transaction happen. Its goal for per-share earnings growth would increase to between 9 percent and 11 percent from 7 percent to 9 percent.
“We hope to engage with the board of Cadbury on a constructive basis with the goal of consummating a recommended transaction,” Kraft Chairman and Chief Executive Officer Irene B. Rosenfeld said in the statement. “Cadbury’s brands, which are highly complementary to our portfolio, would benefit from Kraft Foods’ global scope and scale and array of proprietary technologies and processes.”
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