Cadbury’s falls to Kraft’s £11.7 billion offer

Just one day since Hershey were rumoured to be preparing a bid for Cadbury, the British confectioner has agreed terms overnight with original suitor Kraft for £11.7 billion. After more than four months of public verbal sparring, the British chocolate maker, which dates back to 1824 when Quaker John Cadbury first introduced cocoa-based hot drinks to his tea shop, joins a long list of UK brands that have fallen to foreign takeovers in recent years. Among them are Boots, Jaguar Land Rover, P&O, Pilkington, Corus and ICI.

At a minimum, Kraft’s long courtship of Cadbury proves the value of playing hard to get. An offer of 770p a share last September – described as “derisory” by Cadbury chairman Roger Carr – had by last night become an acceptable 850p a share (made up of 840p plus a 10p dividend).

The deal was done as Kraft faced a midnight deadline imposed by takeover authorities to make a final offer. Led by chief executive Irene Rosenfeld, who has been in London selling the deal for more than a week, Kraft's bid represents a five per cent premium over the value of Cadbury at its current share price of 807.5p.

“On Tuesday the war of words stops and Kraft has to put a sensible offer on the table, otherwise Rosenfeld will have to explain to her shareholders just why she sold one of Kraft’s best growth platforms in the US” explained Graham Jones, an analyst at Panmure Gordon, referring to Kraft's sale of its pizza business to raise cash for the Cadbury bid.

Just days ago, Carr was urging Cadbury shareholders not to let Kraft “steal” the 186-year-old confectionery business while Cadbury chief executive Todd Stitzer accused Rosenfeld of a history of "over-promising and Under-delivering".

Unions warned a Kraft buyout could trigger substantial job losses among Cadbury’s 45,000-strong worldwide workforce, which included more than 9,000 in Britain.

Chocolate connoisseurs have been concerned that Kraft will cut corners that diminish its product, particularly in Ireland where Cadbury products like Golden Crisp and Tiffin surpass its British selections.

The takeover  is the biggest deal in the sweets sector since Nestle bought Rowntree in 1988. Kraft maintains it is "eager to build upon Cadbury's iconic brands and strong British heritage".

But is 850 pence for Cadbury a good deal? No, says David Cumming, head of UK equities at Standard Life, just before the 850p deal was accepted. "If Kraft want to get Cadbury's they need to pay a full price to get long-term shareholders like that on their side and that price would have to be, in my view, above £9 a share. Cadbury is quite a well-run business and they've done a good job, their existing management team."

Too late. ·