Page last updated at 10:54 GMT, Tuesday, 19 January 2010

Cadbury agrees Kraft takeover bid

Union: 'Sad day' for Cadbury

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).

Kraft said the deal would create a "global confectionery leader".

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 increase in Kraft's debt to pay for Cadbury will doubtless worry its employees
BBC business editor Robert Peston

"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 chairman Roger Carr.

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."

Shareholder approval

The deal is a significant increase on earlier Kraft bids, which were flatly rejected by the Cadbury board as "derisory".

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.

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 later
Merged with rival confectioner J.S. Fry & Sons in 1919
Merged with Schweppes drinks business in 1969. Its drinks arm was spun off in 2008
Employs about 45,000 people in 60 countries
Cadbury 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.

"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%.

Job fears

Unions have expressed concerns that the Kraft takeover could cost jobs.

The company has given no specific assurances over the future of 4,500 UK jobs, though it says it wants to invest in the Bournville site and maintain production at Somerdale, near Bristol, also known as Keynsham.

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.

KRAFT FOODS
Founded in Illinois as a cheese wholesaler in 1903
Bought in 1988 by Philip Morris, which also purchased Nabisco for $19.2bn in 2000 before integrating it into Kraft Foods
More than 40 of its brands are more than 100 years old
Has 98,000 employees and 168 manufacturing and processing facilities worldwide
Kraft brands include: Kenco, Ritz, Philadelphia spread, Tang, Alpen Gold and Oreo

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.

"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.

"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."



Print Sponsor


SEE ALSO
Union fear for 7,000 Cadbury jobs
13 Jan 10 |  West Midlands
Cadbury campaigners stage events
16 Jan 10 |  England
Kraft 'must raise Cadbury offer'
16 Jan 10 |  Business
Cadbury's fight for independence
24 Dec 09 |  Business
Cadbury: The factory in the garden
14 Dec 09 |  England

RELATED INTERNET LINKS
The BBC is not responsible for the content of external internet sites



FEATURES, VIEWS, ANALYSIS
Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit

BBC navigation

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.

Americas Africa Europe Middle East South Asia Asia Pacific