Ferrero drops out of Cadbury race

Italian confectioner Ferrero ruled itself out of the Cadbury takeover race today after last week's recommended £11.9 billion bid from US food giant Kraft.

Ferrero - famed for its Rocher chocolates and advertisements - had been weighing up its options over the Dairy Milk maker since November amid rumours of a joint approach with US rival Hershey.

But Hershey formally withdrew from the race on Friday, clearing the way for Kraft's takeover.

Kraft, which makes products ranging from Terry's Chocolate Orange to Maxwell House coffee, also gave more details on the terms of its offer today.

Although Kraft's offer for Cadbury last week included 500p cash, some investors can opt to be paid 799p in cash if other shareholders choose to accept a greater proportion of Kraft's shares in payment.

The total value of the US firm's offer - including the 10p special dividend - has edged down from 850p to 837p because of the pound's fall against the dollar since December. This lowers the conversion price of Kraft's shares, which are priced in dollars.

"The final offer's value will change as the Kraft Foods share price and the USD/GBP exchange rate change," the US company added.

Charles Stanley analyst Jeremy Batstone-Carr said UK shareholders in Cadbury were likely to dump the Kraft shares.

"UK-based investors are unlikely to want to hold Kraft stock... We believe that as many as half these holders... will be looking for alternative investment destinations here in the UK," he added.

Shareholders have until February 2 to accept Kraft's offer, which will end Cadbury's heritage as an independent business stretching back to 1824.

The combined group would have more than 40 major confectionery brands, becoming the world's number one chocolate and sweets firm and the second biggest in chewing gum with the addition of Cadbury's Trident brand.