Kraft Agrees To Pay GBP11.9 Billion For Cadbury, 60% In Cash

Cadbury PLC (CBY) Tuesday accepted a GBP11.9 billion takeover offer from Kraft Foods Inc. (KFT) of the U.S., a deal that ends a four-month acrimonious battle and nearly 200-years of independence for the U.K.'s largest confectionery company.

The U.S. food giant, which makes Toblerone and Milka chocolate as well as processed cheese and ready meals, said it has agreed to pay 840 pence a share for the company as well as a 10 pence dividend, sweetening the original offer and significantly increasing the cash element.

Kraft has agreed to pay 500 pence in cash for each Cadbury share as well as 0.1874 new Kraft shares, up from its original offer of 300 pence in cash and 0.2589 new Kraft shares. The original hostile bid had been rejected by Cadbury for being "derisory" and had been criticized by some shareholders for offering too little in cash.

"Kraft Foods believes that the final offer represents a compelling opportunity for Cadbury Securityholders, providing the ability to receive approximately 60% of their consideration in cash and long-term value creation potential," it said.

Kraft's decision to raise the cash part of the bid and lower the stock element will appease Kraft's largest shareholder Warren Buffett, who warned the company earlier this month against issuing too much new Kraft stock to pay for a deal.

The recommendation from Cadbury's board effectively signals the end of Cadbury's 186-years as an independent company. While Kraft could still theoretically be outbid by a rival offer--the U.K. takeover authorities have set a deadline of Jan 26 for any rival offers to be put forward--it is now certain that Cadbury will lose its independence.

However, people close to U.S. chocolate maker Hershey Co. (HSY), which had been mulling a counterbid for Cadbury, told the Wall Street Journal Monday that Hershey would likely drop out of the running if Cadbury and Kraft agreed a deal.

Jeffries International analyst Simon Marshall-Lockyer said that given the level of Tuesday's bid, "the chances of a counterbid from Hershey seems remote."

Kraft's original offer was worth about 762 pence a share. Analysts have said consistently said the offer would need to be raised above 800 pence a share to have any chance of success.

-By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278; michael.carolan@dowjones.com

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