Wednesday, September 30, 2009

UK sets Nov 9 deadline for Kraft's Cadbury bid

S Kalyana Ramanathan / London October 01, 2009,

UK’s Takeover Panel today asked US confectioner Kraft Foods Inc to make its final offer (popularly known as “put-up or shut-up”) to take over Cadbury Plc by November 9, or announce that it does not intend to make any fresh offer at all.

This ultimatum from the regulator comes a month after Cadbury rejected Kraft’s 745p-a-share (Rs 571 a share) takeover offer, which valued the UK confectioner at £10.2 billion ($16.3 billion, or Rs 79,000 crore).

Should Kraft fail to make an improved offer, it would be barred from making any offer for six months after the issued deadline, according to takeover regulations in the UK.

Kraft had made a proposal to the Cadbury board on August 28, which was rejected in a letter to the chairman and CEO of Kraft on August 31.

On September 7, Kraft published the terms of this proposal and the board of Cadbury confirmed that it had rejected the proposal on the grounds that it made no strategic or financial sense for Cadbury and fundamentally undervalued the group and its prospects. “The board’s view has not changed since then and the board reiterates its rejection of Kraft’s approach,” Cadbury said today.

Cadbury Chairman Roger Carr said: “Cadbury has a strong position in the global confectionery market and the board is confident in Cadbury’s standalone pure-play strategy and growth prospects. We have made our position on Kraft’s proposal very clear and we welcome the panel’s decision today in the interests of obtaining clarity and certainty for our shareholders and employees at the earliest opportunity.”

Any prospective change in Cadbury’s ownership or future structure, should the suitor plan to merge it with itself, will have a direct impact on the confectioner’s operations in India as well. Cadbury considers India as one of its most important market in its global operations.

The £5.4-billion company, which operates out of 60 countries, names India as one its strongest growth drivers among other markets like the UK, the US, Australia, France, Mexico, Canada, Brazil, Japan, South Africa and Turkey. Recent investor statements have shown that primary growth for this company in Asia has come mainly from India, with Asia as a market contributing 6 per cent of its total revenues but registering growth at 12 per cent a year, while overall growth for the company has been around 7 per cent.

While India and Japan are two major markets for this company in Asia, it is yet to make a strong presence felt in a market like China.

Since the last offer from Kraft, the share price of Cadbury has moved up to around 800p.

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