Kraft sweetens bid for Cadbury

As expected, Kraft has sweetened its offer for Cadbury, with a new proposal containing a cash element enabled by the sale of its North American pizza business to Nestlé

Nestlé, meanwhile, has ruled itself out of a bid, publishing the following statement this morning: “Nestlé confirms that it does not intend to make, or participate in, a formal offer for Cadbury.”
In a short statement released to the stock exchange this morning containing no detailed figures, Kraft said it would use the proceeds of the pizza sale to sweeten its bid for Cadbury by increasing the cash element of the offer - by around 60p per Cadbury share. Kraft’s original offer was 300p in cash and 0.2589 Kraft shares for each Cadbury share.
It said: “Kraft Foods will use an amount equivalent to the full net proceeds from the sale [of its pizza business] ... to fund a partial cash alternative as part of its offer for Cadbury. Kraft Foods is doing this because of the desire expressed by some Cadbury security holders to have a greater proportion of the offer in cash and because Kraft shareholders have expressed a desire for Kraft to be more sparing in its use of undervalued Kraft Foods shares as currency for the offer.”
Kraft will announce the detailed terms of the cash alternative by January 19, said the firm.
Cadbury investors who accept the offer will be able to choose to receive an extra 60p per share in cash or 240p per Cadbury ADS (American depositary share - shares of the company that are traded in the US), instead of some of the new Kraft shares they would otherwise have been offered.

Meanwhile, the deadline for Cadbury shareholders to respond to Kraft’s current offer for Cadbury is being extended until February 2.
Other potential bidders - such as Ferrero or Hershey - have until January 23 to launch rival offers.

Nestlé’s $3.7bn acquisition of Kraft Foods’ frozen pizza business in the US and Canada includes brands such as DiGiorno, Tombstone, California Pizza Kitchen, Jack’s and Delissio.
The acquisition gives Nestlé “leadership in the frozen pizza category, where it only had a minor presence until now, and builds on Nestlé’s existing pizza know-how and operations in Europe”, said the company. “Nestlé will become the world leader in the attractive, fast-growing frozen pizza category.”

The transaction is subject to US and Canadian regulatory approval and is expected to be completed in 2010.