Resistance melts as Kraft raises Cadbury bid

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Cadbury today backed a higher £11.5 billion recommended takeover offer from its US suitor Kraft Foods.

Philadelphia cheese maker Kraft said it had the support of the Cadbury board after tabling a revised offer worth 840 pence a share.

Kraft boss Irene Rosenfeld said the food giant had "great respect for Cadbury's brands, heritage and people" as it outlined details of the deal.

If accepted by shareholders, it will end an independent history for the Dairy Milk maker that dates back to 1824.

Cadbury's board is unanimously recommending its shareholders back the bid in what marks a turnaround in the hotly contested takeover battle.

The group's bosses have described Kraft's previous hostile approaches as "derisory".

But Roger Carr, chairman of Cadbury, said: "We believe the offer represents good value for Cadbury shareholders and are pleased with the commitment that Kraft Foods has made to our heritage, values and people throughout the world.

"We will now work with the Kraft Foods' management to ensure the continued success and growth of the business for the benefit of our customers, consumers and employees."

Kraft faces strong opposition from UK trade unions amid job loss concerns.

Cadbury employs around 45,000 people in 60 countries, with 5,600 staff at eight manufacturing sites in the UK and Ireland, including a facility in Somerdale near Bristol, which is currently scheduled to close, as well as its Bournville factory near Birmingham.

Trade union Unite fears that some 7,000 jobs at Cadbury would be threatened if the takeover goes ahead, because of a "colossal" £22 billion of debt it believes would swamp the group.

Gordon Brown said the Government was "determined jobs in Cadbury can be secure".

Speaking at a press conference at Downing Street, the Prime Minister said: "We are determined that the levels of investment that take place in Cadbury in the United Kingdom are maintained and we are determined that, at a time when people are worried about their jobs, that jobs in Cadbury can be secure."

Cadbury shareholders now have until February 2 to accept Kraft's revised bid, which has been upped from an initial approach worth just over £10 billion.

Kraft also said today that it was lowering the shareholder acceptance level to a simple majority of 50 per cent.

As well as 840p a share, Kraft is also offering a previously announced Cadbury dividend of 10p a share.

Workers outside the Bournville plant had little to say about the deal.

But one man admitted: "There are a lot of worried people inside that building."

The employee, who asked not to be named, added: "Nobody really knows what is going on or what this might mean in terms of job losses, but inside that factory there are a lot of people who are very, very worried about the future - the future of the company and their own future, their jobs and their families.

"It is not a good atmosphere here today."

Kraft has been pursuing Cadbury since last September, but until now has received short shrift from the group.

Mr Carr previously led a robust defence of the firm's 185-year independence and blasted Kraft's "low growth, conglomerate business" as an "unattractive prospect".

It has reportedly been keen to see a white knight alternative proposal from US group Hershey, with which it already has an existing relationship, as Hershey makes Dairy Milk bars and Creme Eggs under licence in the US.

Hershey has already said it is reviewing its options for Cadbury, but was today given a deadline of Monday by the City takeover watchdog for it to make an approach or walk away.

It is said to have decided that it can mount a bid without losing its investment-grade credit rating.

However, there are doubts that Hershey has the firepower to out-do Kraft, which is around five times its size.

It was reported to have been working on a joint bid with Italian chocolate group Ferrero - the group behind Ferrero Rocher, which has also confirmed interest.

But Ferrero, which must also abide by Monday's Takeover Panel deadline, is understood to have ruled itself out of the running.

Business Secretary Lord Mandelson, who has voiced opposition to the Kraft takeover so far, said the US firm must be "clear about what it will put into Cadbury so as to build capacity for growth".

"I am encouraged by Kraft's comments this morning about the great respect they have for Cadbury's brands, heritage and people," he said.

"Assuming this deal goes through, I will be seeking an early meeting with Kraft senior management to hear for myself how Kraft will fulfil the commitments they have made to Cadbury and its workforce."

Today's revised bid from Kraft failed to ease concerns among Birmingham MPs.

In a joint statement, four MPs warned that a Kraft takeover could "pose real dangers for jobs, innovation and the skill base in the West Midlands".

They said: "We worry about the kind of future that Cadbury's would have as part of this giant multinational whose corporate priorities are decided a long way away from the West Midlands and from those other areas of which Cadbury's has long been a part."

Kraft, whose brand roster includes Dairylea and Toblerone, also faces pressure not to overpay by its biggest shareholder, renowned US billionaire investor Warren Buffett.

The group's chairman and chief executive Irene Rosenfeld said: "This recommended offer represents a compelling opportunity for Cadbury shareholders, providing both immediate value certainty and upside potential in the combined company.

"For Kraft Foods' shareholders it transforms the portfolio, accelerates long-term growth and delivers highly attractive returns, while maintaining financial discipline."