Ferrero formally withdraws Cadbury interest

Ferrero formally ruled itself out of the running for Cadbury today, leaving Kraft’s £11.9bn takeover bid uncontested.

The statement from the Italian choclatier came on the day that the Takeover Panel deadline for competing offers expired.

Hershey, the other prospective bidder for Cadbury, which had been tipped to make a joint approach with Ferrero, stepped out of the race on Friday.

In accordance with Takeover Panel rules, Ferrero has reserved the right to come back with an offer within six months if there is a “material change in circumstances”, if Kraft withdraws, or if Cadbury agrees to an offer from elsewhere.

Kraft now has until 2 February to convince Cadbury’s shareholders to accept the cash and share offer. The US food conglomerate made its first approach in early September, and increased the cash value early this year. But the Cadbury board repeatedly dismissed the approaches as “derisory” and warned shareholders not to allow Kraft to “steal” the company.

But last week, when the US giant upped its offer by nearly £2bn, Cadbury’s board capitulated and recommended that the group’s shareholders accept the new deal. When the bid was announced last week, it valued Cadbury’s shares at 840p each, including a 10p special dividend. On the day before the first approach from Kraft, the stock closed at 568p.

If the deal goes ahead, it will create the world’s largest confectioner. But despite the support from the Cadbury board, there is still considerable opposition to the deal. When he announced the deal last week, Chairman Roger Carr acknowledged the likelihood of job cuts at the company’s Bournville factory. MPs and trade unions are also warning about job losses, and there is to be an adjournment debate on the issue in Parliament on Tuesday. But at the weekend, Kraft said it expects the deal to create more manufacturing jobs in the UK.

Kraft is to finance the deal with a $9.5bn (£5.9bn) bond issue and the issue of a tranche of new shares. Billionaire investor Warren Buffett, who is Kraft’s biggest shareholder, branded the takeover as a “bad deal” last week, blaming the $1.3bn reorganisation costs and the $390m deal fees that Kraft will incur.

The final iteration of the offer for Cadbury raised the cash component to 60 per cent and reduced the volume of new shares to less than 20 per cent of Kraft’s market capitalisation. The changes were in part a response to Cadbury shareholders’ push for more money and fewer Kraft shares. But they also followed public comments from Mr Buffett that Kraft shares were an “expensive currency” in which to buy Cadbury.

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