BGN Entrepreneur

Kraft is drawing up plans to raise its £10.3bn hostile offer for Cadbury ahead of a deadline this month as the takeover battle for the UK confectionery group reaches its final stages.
The US food group, which first approached Cadbury in late August, has until January 19 to increase its offer, which currently values the company at about 740p per share.
Kraft’s offer is expected to fail at current levels as it has not won the support of enough shareholders and Cadbury’s board. Cadbury shareholders have supported the board’s decision to reject the bid, arguing the company is worth about 800p per share. Cadbury’s shares closed on Friday at 797.50p.
Although the Takeover Panel has set an initial deadline of tomorrow for Cadbury shareholders to tender their shares, Kraft is expected to extend this deadline by up to two weeks.
The US food group is likely to wait until Cadbury’s trading update on January 15 before making a final decision on whether to raise its offer. It could also increase the cash portion of its bid. Although nearly half of Cadbury’s shareholders are based in the US, many shareholders are reluctant to swap Cadbury’s stock for Kraft stock due to the US company’s lower earnings growth. Kraft’s current offer consists of 60% stock and 40% cash.
Cadbury will release its final defense arguments on January 12, which is the last day it is allowed to make new arguments against Kraft’s bid. The company will then issue a trading update on January 15. Cadbury has already said it is on track to meet new financial targets, including annual revenue growth of between 5 and 7 per cent. It also aims to increase profit margins to between 16-18% by 2013.
Kraft’s negotiating position has been strengthened by an increase in its share price over the past month. It closed at $27.18 on Friday, compared with $26.50 at the start of December. People close to Kraft said the company’s shares were stronger as no counter-bidders had emerged, suggesting the US food group would not need to over-pay for Cadbury. Although Hershey and Ferrero have indicated they were considering making offers for Cadbury, neither company has made a formal bid.
Todd Stitzer, Cadbury’s chief executive, has suggested Cadbury would prefer an acquisition by Kraft due to the companies’ cultural similarities. But Roger Carr, Cadbury’s chairman, has said the board will base any recommendation purely on value.

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