Cadbury attacks Kraft over takeover bid

Cadbury has issued a stinging riposte to US food giant Kraft in an open letter slamming its unsolicited takeover bid, it emerged today.

The Dairy Milk firm's chairman Roger Carr dismissed the "unappealing prospect" of Cadbury being absorbed into "Kraft's low growth, conglomerate business model" in the letter addressed to Kraft chief executive Irene Rosenfeld.

Mr Carr detailed his opposition to Kraft's £10.2 billion bid and said the offer "fundamentally" undervalued the business and was of "uncertain value" for Cadbury's shareholders.

Kraft - the firm behind brands including Dairylea, Kenco coffee and Terry's Chocolate Orange - made the unsolicited cash-and-shares approach to Cadbury on Monday.

But while Cadbury's shares soared 36.5% in the past week, Kraft's have slumped about 7%, reducing the value of the proposal.

Mr Carr put particular emphasis on Cadbury's position as a focused confectionery company in the letter - the firm spun off its US beverages business last year.

"Under your proposal, Cadbury would be absorbed into Kraft's low growth, conglomerate business model, an unappealing prospect which contrasts sharply with our strategy to be a pure play confectionery company," he said.

Kraft, he added, has a "considerably less focused business mix and historically lower growth" than his firm.

"In addition, the proposal is of uncertain value for Cadbury shareholders as underlined by the movement in the Kraft share price since your announcement," he added.

Mr Carr's letter opens the door for a further bid from Kraft and analysts have already speculated that the firm might need to up its 745p-a-share offer to at least 800p - equivalent to £11 billion - to secure a Cadbury deal.

But Cadbury, founded by Quaker John Cadbury in 1824, is also thought to have attracted the attentions of other global food rivals such as Hershey, Nestle and Mars.

A takeover of Cadbury, which is the world's second biggest confectionery firm behind Mars, would mark the biggest in the UK sweets sector since Nestle bought Rowntree in 1988.

Kraft said at the time of its offer that it was "eager to build upon Cadbury's iconic brands and strong British heritage".

It also expressed a hope to keep open Cadbury's Somerdale facility near Bristol, which is currently scheduled to close in early 2010, while investing in the firm's Bournville factory near Birmingham.

Kraft has said a deal between its firm and Cadbury would create a "global powerhouse" with annual sales of about 50 billion US dollars (£30.5 billion).

But ratings agencies have raised concerns that a deal would add to Kraft's debts.

Kraft did not release a statement in response to Mr Carr's letter, which was posted on the Cadbury website yesterday.

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