Before 9am today, Kraft launched a hostile bid for the confectionery maker Cadbury. The deal: 300p in cash and 0.2589 Kraft shares for every Cadbury share, bringing the total value to £9.8bn or 717p a share. Note that this is the same offer that was offered back in September although back then, the value stood at 745p a share.
Cadbury was, however, quick to reject. Following is the statement released by the company:
9 November 2009
Cadbury Statement in Response to Announcement by Kraft Foods of a Formal Offer
Cadbury plc (‘Cadbury’) notes the announcement of an unsolicited offer by Kraft Foods Inc. (‘Kraft’) of 300p and 0.2589 Kraft shares per Cadbury share, implying a value for each Cadbury share of 717 pence (based on the closing price of USD 26.78 for a Kraft share on 6 November 2009 and an exchange rate of 1.6609 USD / GBP) (the ‘Offer’).
The Offer’s cash price per share and exchange ratio are unchanged from Kraft’s announcement of 7 September. However, due to the fall in the Kraft share price since then, the implied value for each Cadbury share is around 4% lower. Therefore, the Offer is worse than the proposal that the Board has previously rejected as
fundamentally undervaluing Cadbury and its prospects.
Accordingly, the Board recommends shareholders reject the Offer and in due course will be communicating with shareholders to set out in more detail why it believes the Offer falls well short of reflecting the value of Cadbury.
Roger Carr, Chairman of Cadbury, said: ‘The repetition of a proposal which is now of less value and lower than the current Cadbury share price does not make it any more attractive. As a result, the Board has emphatically rejected this derisory offer and has strengthened its resolve to ensure the true value of Cadbury is fully understood by all.
‘Cadbury is an exceptional standalone business. It has strong iconic brands, a sharp category focus and an enviable geographic scope. Our successful financial delivery and strong business model reinforce the Board’s belief in both the strategy and prospects of Cadbury as an independent company.
‘Kraft’s offer does not come remotely close to reflecting the true value of our company, and involves the unattractive prospect of the absorption of Cadbury into a low growth conglomerate business model.
‘I am confident Cadbury will deliver significant value – which should accrue wholly to our shareholders.’