Long-term Cadbury shareholders have been rewarded with a 50% gain over the pre-bid price after finally bowing to a new takeover offer from Kraft Foods.
The new offer comprises 500p a share in cash and Kraft stock worth a total of 840p, In addition, Cadbury will pay a special 10p a share dividend. All up, it is worth £11.9 billion ($US19.7 billion).
It was sweet enough to convince Cadbury’s long-standing shareholders, who had resisted the bid.
However, the register was dominated by hedge funds, who had snapped up shares since the bid was first signaled back in September and were keen on a quick exit.
Even so, at 13 times Cadbury's 2009 earnings before interest, tax, depreciation and amortisation (ebitda), the Kraft offer is at the low end of recent food-sector-transaction multiples.
The merger means Kraft will now displace Mars as the world’s largest confectionery company, with prominent chocolate, sweets and chewing gum brands.
Annual sales will total about $US50 billion and in New Zealand it will mean the Cadbury and Pascall brands coming under the same roof as Vegemite and Philadelphia cream cheese.
Though Kraft has major units in dairy products, coffee, biscuits and chocolate, and a reputation for allowing these to operate discretely, it will also be keen on synergies.
It says the purchase will result in at least $US675 million in annual cost savings, $US50 million more than it previously estimated, and will give the company leading positions in emerging markets, including India, Brazil and Mexico.
The purchase should close in mid-February. A rival bid from Hershey is now considered highly unlikely.
In Australia and New Zealand, there is little overlap in existing operations or products. Cadbury has factories in both countries while most of Kraft’s products are made in Australia. Its European chocolate products, such as Toblerone, are imported.
A few years ago, Kraft largely closed most of its businesses in New Zealand, selling its former Butland Industries brands such as Chesdale cheese to Fonterra.
Cadbury's local turnover is around $300 million and with Kraft's sales will push it into the top 20 of food and beverage companies.
Wed, 20 Jan 2010