Kraft's bid for Cadbury in the balance as Buffett intervenes

US food giant offers more cash but fails to raise value of hostile takeover offer

Kraft has sweetened its hostile bid for Cadbury yesterday but the US food giant's plans for a share issue to help pay for the deal were attacked by its biggest shareholder, Warren Buffett.

The new offer, still valuing Cadbury at £10.5bn, came after Kraft raised the cash component from the $3.7bn (£2.3bn) sale of its North American pizza business to Nestlé.

Cadbury dismissed Kraft's original proposal of 300p per share plus 0.2589 Kraft shares as "derisory", and yesterday repeated its scorn for the new 360p per share deal. "Kraft has once again missed the point," a spokesman said. "Despite this tinkering, the Kraft offer remains unchanged and derisory with less than half the consideration in cash."

The British confectioner found an unexpected ally in Mr Buffett, whose Berkshire Hathaway investment vehicle owns 9.4 per cent of Kraft. Cadbury executives say the Kraft offer fundamentally undervalues their business, and the man nicknamed the Sage of Omaha says it is equally bad for Kraft. Mr Buffett publicly condemned the Cadbury merger plan and said he would vote against the Kraft chief executive Irene Rosenfeld's plan to issue new 370 million new shares to fund it.

"Kraft stock, at its current price of $27, is a very expensive 'currency' to be used in an acquisition," Mr Buffett said. "In 2007, in fact, Kraft spent $3.6bn to repurchase shares at about $33 per share, presumably because the directors and management thought the shares to be worth more."

He also said a "yes" vote would give Kraft's management a "blank cheque" to pay whatever they want for Cadbury.

Though analysts remain divided about Kraft's chances of securing Cadbury, the row leaves the company – and its CEO – dangerously exposed. "Berkshire Hathaway is firing a shot across Kraft's bows, warning it not to ride roughshod over its own shareholders in the desire to get hold of Cadbury," said Jeremy Batstone-Carr, head of research at Charles Stanley. "If Kraft's attempts to give it the scope to raise its offer are vetoed, it is in trouble."

The implications for Ms Rosenfeld are even worse. Kraft has already suffered from Cadbury's repeated jibes that it is a low-growth conglomerate with few prospects, a criticism thrown into further relief by the sale of the fast-growing US pizza business. If the takeover fails, Ms Rosenfeld's strategy will be left in tatters.

"I would be surprised if she lasted a year if this deal doesn't go ahead," Mr Batstone-Carr added.

But Cadbury will also not escape unscathed. It will need to maintain the recent improvements in sales volumes and margins it has used to justify its rejection of a £10.5bn price tag.

Yesterday's developments did go some way to clarify Cadbury's future. Nestlé was tipped to make a counter offer – particularly after the sale of its Alcon eyecare business for £17.4bn on Monday. But after the Kraft acquisition, the Swiss group formally stepped out of the running. "After discussions with the UK Takeover Panel regarding the potential for further speculation in respect of Cadbury following Nestle's recent announcements, Nestlé confirms that it does not intend to make, or participate in, a formal offer for Cadbury," the company said.

Italy's Ferrero and US confectioner Hershey are still in the frame as possible bidders, but so far neither has made a formal approach. If the Kraft bid fails, neither is likely to pursue the matter further. "Everybody was trying to protect their own interests but if the Kraft deal doesn't go ahead then all bets are off," Mr Batstone-Carr added.

Crunch time: How the Cadbury saga is due to unfold

* The four-month tussle between Kraft and Cadbury will be resolved within weeks as a string of key deadlines expire. The first is 15 January – the last day that Cadbury can issue a trading update to bolster its claims that Kraft's £10.5bn bid is "derisory" and fundamentally undervalues the business.

* The Takeover Panel's deadline for Kraft to set out the details of its new proposal is 19 January. The US food company said yesterday that it would offer 360p per share in cash instead of the 300p per share originally proposed, but Kraft has not yet specified the reduced fraction of its shares to go with the updated offer.

* The deadline for Cadbury investors to accept the revised bid from Kraft is 2 February.

* 2 February is also effectively the last date for any other offers for Cadbury. The Swiss food conglomerate Nestlé yesterday ruled itself out of the bidding, but Italy's Ferrero International and the US confectioner Hershey may yet choose to get involved. Both companies have been the subject of much speculation but neither has yet made any formal bid.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Wolf (Nathan McMullen), Ian (Dan Starky), The Doctor (Peter Capaldi), Clara (Jenna Coleman), Santa Claus (Nick Frost) in the Doctor Who Christmas Special (BBC/Photographer: David Venni)
tvOur review of the Doctor Who Christmas Special
News
peopleIt seems you can't silence Katie Hopkins, even on Christmas Day...
Arts and Entertainment
Left to right: Stanley Tucci, Sophie Grabol and Christopher Eccleston in ‘Fortitude’
tvSo Sky Atlantic arrived in Iceland to film their new and supposedly snow-bound series 'Fortitude'...
Arts and Entertainment
Jenna Coleman as Clara Oswald in the Doctor Who Christmas special
tvForget the rumours that Clara Oswald would be quitting the Tardis
PROMOTED VIDEO
Arts and Entertainment
Sir Bruce Forsyth with Tess Daly in the BBC's Strictly Come Dancing Christmas Special
tvLouis Smith wins with 'Jingle Bells' quickstep on Strictly Come Dancing's Christmas Special
Arts and Entertainment
Japanese artist Megumi Igarashi showing a small mascot shaped like a vagina
art
News
The Queen delivers her Christmas message
newsTwitter reacts to Her Majesty's Christmas Message
Arts and Entertainment
tv
Life and Style
fashion
Sport
sport
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

Day In a Page

Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there