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Cadbury agrees Kraft takeover bid Cadbury agrees Kraft takeover bid
(30 minutes later)
Cadbury is to be taken over by the US food company Kraft after its board approved a new increased bid.Cadbury is to be taken over by the US food company Kraft after its board approved a new increased bid.
The Cadbury board has advised its shareholders to accept a new offer of 840 pence a share - valuing the company at £11.5bn ($18.9bn).The Cadbury board has advised its shareholders to accept a new offer of 840 pence a share - valuing the company at £11.5bn ($18.9bn).
Kraft said the deal would create a "global confectionery leader".Kraft said the deal would create a "global confectionery leader".
Cadbury shareholders will also receive a dividend of 10 pence a share, and have until 2 February to give the deal their backing. But there are renewed fears over possible job cuts at Cadbury's UK operations as a result of the agreed takeover.
Shareholders have until 2 February to give the deal their backing, with the US confectioner Hershey apparently out of the race.
The offer will consist of 500 pence in cash, with the rest made of Kraft shares. Kraft will borrow £7bn ($11.5bn) to finance the deal.The offer will consist of 500 pence in cash, with the rest made of Kraft shares. Kraft will borrow £7bn ($11.5bn) to finance the deal.
Hershey appears to have dropped out of the bidding race. The increase in Kraft's debt to pay for Cadbury will doubtless worry its employees BBC business editor Robert Peston class="" href="http://www.bbc.co.uk/blogs/thereporters/robertpeston/">Peston: The takeover terms class="" href="http://newsforums.bbc.co.uk/nol/thread.jspa?forumID=7423&edition=2">Send us your comments
"We believe the offer represents good value for Cadbury shareholders... and will now work with the Kraft Foods' management to ensure the continued success and growth of the business," said Cadbury's chief executive Roger Carr."We believe the offer represents good value for Cadbury shareholders... and will now work with the Kraft Foods' management to ensure the continued success and growth of the business," said Cadbury's chief executive Roger Carr.
Irene Rosenfeld, the chairman and chief executive of Kraft Foods, said the deal was good news for shareholders and staff.Irene Rosenfeld, the chairman and chief executive of Kraft Foods, said the deal was good news for shareholders and staff.
"We have great respect for Cadbury's brands, heritage and people," she said. "We believe they will thrive as part of Kraft Foods.""We have great respect for Cadbury's brands, heritage and people," she said. "We believe they will thrive as part of Kraft Foods."
Shareholder approvalShareholder approval
The deal is a significant increase on earlier Kraft bids, which were flatly rejected by the Cadbury board as "derisory".The deal is a significant increase on earlier Kraft bids, which were flatly rejected by the Cadbury board as "derisory".
The increase in Kraft's debt to pay for Cadbury will doubtless worry its employees BBC business editor Robert Peston Peston: The takeover terms Read your comments
Kraft's previous offer valued the company at £10.5bn - a bid Cadbury's chairman Roger Carr said was an attempt to "buy Cadbury on the cheap".Kraft's previous offer valued the company at £10.5bn - a bid Cadbury's chairman Roger Carr said was an attempt to "buy Cadbury on the cheap".
Shareholders are expected to agree to the takeover.Shareholders are expected to agree to the takeover.
David Cumming, head of UK equities at Cadbury shareholder Standard Life, said that he would be agreeing, despite hoping for a higher price.David Cumming, head of UK equities at Cadbury shareholder Standard Life, said that he would be agreeing, despite hoping for a higher price.
CADBURY John Cadbury, a Quaker, opened a shop in Birmingham in 1824, selling tea, coffee and hot chocolate - as an alternative to alcohol Dairy Milk brand introduced in 1905, with Milk Tray coming 10 years laterMerged with Schweppes drinks business in 1969. Its drinks arm was spun off in 2008Employs about 45,000 people in 60 countriesCadbury brands include: Dairy Milk, Flake, Crunchie, Chocolate Buttons and Milk Tray
"I won't go against the view of Cadbury's management," he told the BBC."I won't go against the view of Cadbury's management," he told the BBC.
"Kraft are getting a good deal. It's sad that Cadbury is gone, but business is business.""Kraft are getting a good deal. It's sad that Cadbury is gone, but business is business."
In early trading on Tuesday, Cadbury shares were up 3.5%.In early trading on Tuesday, Cadbury shares were up 3.5%.
Job fearsJob fears
Unions have expressed concerns that the Kraft takeover could cost jobs.Unions have expressed concerns that the Kraft takeover could cost jobs.
KRAFT'S NEW EMPIRE Kraft brands include: Kenco, Ritz, Philadelphia spread, Tang, Alpen Gold and OreoCadbury brands include: Dairy Milk, Flake, Crunchie, Chocolate Buttons and Milk Tray The company has given no specific assurances over UK jobs, though it says it wants to invest in the Bournville site and maintain production at Somerdale.
Kraft is likely to commit to protecting jobs at the Somerdale and Bournville sites in the UK, according to the BBC's business editor Robert Peston, though staff numbers at Cadbury's head office in Uxbridge are expected to be cut. It has not ruled out cuts, and staff numbers at Cadbury's head office in Uxbridge are expected to be reduced, according to the BBC's business editor Robert Peston.
But Jennie Formby, from the Unite union, said the need for Kraft to cut costs could mean staff cuts in the longer-term. KRAFT FOODS Founded in Illinois as a cheese wholesaler in 1903Bought in 1988 by Philip Morris, which also purchased Nabisco for $19.2bn in 2000 before integrating it into Kraft FoodsMore than 40 of its brands are more than 100 years oldHas 98,000 employees and 168 manufacturing and processing facilities worldwideKraft brands include: Kenco, Ritz, Philadelphia spread, Tang, Alpen Gold and Oreo
We are concerned about the levels of debt that Kraft has," she told the BBC. Kraft also said it expected "meaningful cost savings" as a result of the merger.
Jennie Formby from the Unite union said the need for Kraft to cut costs could mean staff cuts in the longer-term.
"We are concerned about the levels of debt that Kraft has," she told the BBC.
"The sad truth is that when they have to pay down that debt, the soft option is jobs and conditions."The sad truth is that when they have to pay down that debt, the soft option is jobs and conditions.
"When you have to make cost savings of the magnitude they will need to make, you have to ask where those cost savings will be made.""When you have to make cost savings of the magnitude they will need to make, you have to ask where those cost savings will be made."
Those fears were shared by David Bailey, professor at Coventry University Business School.Those fears were shared by David Bailey, professor at Coventry University Business School.
"Serious questions need to be asked about Kraft's intentions," he said."Serious questions need to be asked about Kraft's intentions," he said.
"Kraft already has a track record of cutting production and moving production abroad. There's no guarantee that they'll keep production in the UK in the long run.""Kraft already has a track record of cutting production and moving production abroad. There's no guarantee that they'll keep production in the UK in the long run."