Page last updated at 16:02 GMT, Tuesday, 5 January 2010

Nestle rules out takeover bid for Cadbury

A Cadbury Diary Milk
Cadbury is the subject of a hostile takeover bid from Kraft Foods

Food giant Nestle says it does not intend to table a takeover bid for Cadbury, despite recent speculation.

Nestle had been linked to a possible offer following Kraft Food's hostile bid for Cadbury, announced in December.

Separately, Kraft has announced it will increase the proportion of cash in its offer to Cadbury shareholders in order to make its bid more attractive.

Kraft will use cash made from the sale of its North American pizza business - sold to Nestle for $3.7bn (£2.3bn).

'Blank cheque'

However, the battle for Cadbury took another turn when one of Kraft's biggest shareholders - Berkshire Hathaway - said it had voted against Kraft's plans to issue new shares to fund the bid for Cadbury.

The holding company of US billionaire Warren Buffett, which claims to be Kraft's biggest shareholder, said it had voted against Kraft's plans to issue up to 370 million new shares.

"The share-issuance proposal, if enacted, will give Kraft a blank cheque allowing it to change its offer to Cadbury - in any way it wishes," Berkshire Hathaway said in a statement.

"To state the matter simply, a shareholder voting 'yes' today is authorising a huge transaction without knowing its cost or the means of payment."

However, it added that if it decided that Kraft's final offer for Cadbury did "not destroy value for Kraft's shareholders, we will change our vote to 'yes'".

Deal 'tinkering'

7 Sept: Kraft tables offer for Cadbury, valuing the company at about £10bn. The bid is immediately rejected by the Cadbury board
9 Nov: Kraft goes hostile with its takeover bid, and Cadbury again rejects the offer
4 Dec: Kraft details offer aimed at Cadbury shareholders, setting 5 January deadline
14 Dec: Cadbury publishes its defence document, urging its shareholders to reject the Kraft offer
31 Dec: Deadline for shareholders to accept the Kraft bid is extended to 2 February
5 Jan: Kraft announces revised offer with higher cash proportion
15 Jan: Deadline for Cadbury to issue trading update
19 Jan: Deadline for Kraft to publish details of revised offer
2 Feb: Deadline for Cadbury shareholders to accept Kraft bid

Kraft remains the only bidder for Cadbury, although US confectioner Hershey has previously expressed its interest in a possible bid.

There had been speculation that Nestle would enter the bidding too, and on Monday, that speculation was fuelled when Nestle sold its remaining stake in eye-care group Alcon to Novartis for $28.1bn - a deal perceived as freeing up cash for a Cadbury offer.

However, on Tuesday Nestle instead spent some of that money buying Kraft's frozen pizza business, which sells brands including DiGiorno and California Pizza Kitchen in the US and Canada.

In a statement, Nestle said its decision not to make, or participate in, a formal offer for Cadbury followed discussions with the UK Takeover Panel - the body in charge of regulating takeovers.

The sale of its North American pizza business means Kraft will be able to offer an extra 60p per share in cash to Cadbury investors, though the overall value of the offer is not being increased.

The US company will announce full details of its new offer before 19 January.

Kraft's original bid was £3 plus 0.26 new Kraft shares for each Cadbury share - a deal that analysts said would be unlikely to tempt shareholders.

The Cadbury board responded to the latest move by again calling the offer "derisory".

"Despite this tinkering, the Kraft offer remains unchanged and derisory with less than half the consideration in cash," it said in a statement.

James Targett, an analyst at Consumer Equity Research, said it was not clear what difference the extra cash would make.

"It might tempt a few shareholders who want a bit more cash, but nothing's really changed from Cadbury's management's perspective - they still see the offer as undervaluing the company," he told the BBC.

He added that Kraft would be reluctant to raise its offer while it remained the only bidder in the running.

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This is Money Buffett slams Kraft over Cadbury bid - 1 hr ago
CNN Buffett against Kraft's Cadbury bid - 8 hrs ago
Los Angeles Times Buffett opposes Kraft bid to buy Cadbury - 8 hrs ago
The ScotsmanKraft sweetens Cadbury deal after agreeing surprise sale to rival Nestl - 9 hrs ago
Philippine Daily Inquirer With pizza cash, Kraft sweetens bid for Cadbury - 11 hrs ago
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